4 mutual fund categories that are shining bright in these dark days


Most mutual fund investors have resigned to their fate as the markets are constantly experiencing a breakdown on the back of negative news past few months such as the novel coronavirus, YES bank scam, oil price war, and so on. However, you would be surprised to notice that 4 mutual fund categories are shining bright in these dark times. In fact, these categories are offering double-digit returns to their investors. Even very high double-digits in some cases. Let’ take a look at these categories offering substantial returns since the past year:

  • Gold funds
    This category has offered returns more than 35% in a year, with 12 different schemes offering individual returns of over 35%. The top mutual fund scheme in this category is Invesco India Gold ETF with returns of over 38%!
    Gold funds are observed as good diversifiers and experts believe that individuals should allocate at least 5-10% of their portfolio to these funds. Since these schemes can act as a hedge to your portfolio when the equity mutual fund market is going through a rough patch, as experienced currently. However, one should not go overboard with gold funds as well.

  • Banking and PSU debt funds
    Recommended by mutual fund advisors since a long time, banking and PSU debt funds have quite a reputation. Experts believe that this category offers a good alternative to credit risk funds with lesser volatility and more stable portfolio. This category has offered returns near 10.7% in a year. The topper in this category, Edelweiss Banking and PSU Fund offered around 16% returns in a year.
  • Long-duration Bond funds
    This category experienced a rally in the second half of the year 2019 till the Reserve Bank of India (RBI) held the rates in its MPC meet in Feb, 2020. Several market analysts are in the impression that these funds might not hold up to their standards and produce double-digit returns this year. However, with the global uncertainties pushing the return rates way down around the world, these schemes have the potential to benefit. The dip in the prices of crude oil has led to fall in the 10-year-g-sec which aided the longer duration bonds. Even when the debt market is harassed with the YES bank woes, this category has offered more than 19% returns in a year.
  • Gilt funds
    Similar to long-duration bonds, gilt funds have also profited by the dip in yields and on anticipations of a rate cut by the RBI. Many market pundits are anticipating RBI to follow US Feds and cur rates. Most analysts believe that the rate cuts can be greater than 25 bps. Gilt funds with 10-year Constant Duration category has given returns around 16.9%, while the below 10 year Gilt category has offered 14.6% returns in a year.

With several types of mutual funds accessible to an individual like debt funds, equity funds, hybrid funds, etc., you can easily get overwhelmed.Before you zero in on your preferred mutual funds, always remember to align your mutual fund investments with your risk profile, financial goals and investment horizon. Also, try to invest in mutual funds that have showed a constant growth over the years.