There are many investment advisors who will offer you various investment options. However, for you to find the best mutual funds you need to consider some factors. These include: – type of investment, your overall goal and the amount of money you wish to invest.

There are many investment advisors who will offer you various investment options. However, for you to find the best mutual funds you need to consider some factors. These include: – type of investment, your overall goal and the amount of money you wish to invest. With a balanced fund, for instance, you can spread your risk across a fixed income security and an equity fund. Balanced fund investments can be in the ratio of 50% for each type but should not go beyond 65%. Seek Best mutual funds advice from experienced fund managers. They will tell you the types, advantages and disadvantages.

Short Term and Ultra Short Term Funds have become the preferred investment avenue for parking short term funds in the current market scenario. Mr. Rajeev Radhakrishnan, Head – Fixed Income, shares his views & insights about the short term & ultra short term funds & what to expect.

1. Is this a good time to be investing in short term and ultra short term funds? How is SBI Short Horizon Debt Fund – Short Term Fund and Ultra Short Term Fund positioned in the current market scenario?

In the current scenario, high money market rates in the short term are also accompanied by attractive spreads in the AAA segment in the 1-3 yr corporate curve. Short term income funds have an investment mandate to exploit the above opportunities. Retail investors can consider these funds as they have the potential to provide higher accrual income and also the flexibility to generate capital gains given the anticipated downward movement in yields, considering the changed monetary stance. Short term fund has maintained an average portfolio maturity of around 3 yr in the last couple of months. Our short term fund is currently positioned with an average maturity of around 2.70 yrs. Ultra Short term fund is invested predominantly in the 3 month money market securities with a marginal exposure of up to 10% in 3-12 month money market securities.

2. SBI Short Horizon Debt Fund – Short Term Fund and Ultra Short Term Fund have been
performing very well. What are some of the factors that have contributed to this performance?

Ultra Short term scheme has been managed in line with well defined templates which ensure that the scheme is able to deliver consistent risk adjusted returns. Within the internal norms which govern the liquidity and diversification requirements of the scheme such as issuer concentration, investments are made based on macro views regarding interest rates and liquidity situation. Short term fund has predominantly stayed invested in the 1y CD and short term corporate bonds as spreads in that segment continued to remain attractive on a risk adjusted basis in the recent past. We had increased the exposure in Government securities in the last quarter post the sharp up move in yields. The scheme has been able to benefit from the subsequent downward movement in yields. The scheme has focused on a largely accrual strategy in line with its mandate of maximum 3 yr average maturity by investing in a portfolio of high credit quality short term bonds and CD’s.

3. What do you think will be RBI’s policy stance going forward?

The macroeconomic data released recently is consistent with the scenario of broad moderation in growth and easing of inflationary pressures, especially on the food articles front. The core manufacturing inflation however continues to remain elevated, which has also been accentuated by the trends in the currency markets. Though the RBI abstained from giving a timeframe on easing, we believe they could signal a preference for easier liquidity as early as the first quarter of CY2012 starting with a cut in the CRR. We expect them to continue with OMOs in the interim to ease liquidity which would act as a good support for the bond market.

4. What is the ideal time frame an investor should have for investing in SBI Short Horizon Debt Fund – Short Term Fund and Ultra Short Term Fund?

Ultra Short term fund can be considered for investment of short term cash surplus, ranging from a period of a week to a few months. Short term fund has a portfolio average maturity restriction of maximum 3 yrs. The scheme is suitable for investors with a moderate risk appetite and an investment horizon of at least 3 to 6 months.

5. What would you advise investors for the year 2012 and how should they approach the debt and equity markets?

We anticipate that the year 2012 could present interesting opportunities for investors in debt funds. Overall Bond yields are expected to trade lower from the current levels, considering the concerns on growth and the change in the monetary policy stance. We would recommend Dynamic Bond funds for investors with a suitable risk appetite considering the expected volatility in yields. Investors with a moderate risk appetite can consider Short term debt funds. The higher money market yields provide a high accrual, and at the same time these funds are positioned to benefit from the downward trend in yields in the coming year. The elevated money market rates also present an opportunity for conservative investors to lock in their investments in accrual debt products such as FMP’s even as ultra short term funds continue to be attractive destination for very short term cash.

Bottom line
The best mutual funds for one investor may not necessarily work with another. Equity funds have become increasingly popular especially with small investors. With a private equity mutual fund it is possible to take advantage of private company stocks which are not traded in the stock exchange. It is possible to have a balanced fund irrespective of the time frame in which an investment vehicle is expected to make returns. With all these statistics and market evaluation figures all an investor needs is a sufficient return. Decisions on the best mutual funds are therefore critical. With a balanced fund, the risk is spread out.

For more details about SBI Short Horizon Debt Fund – Ultra Short Term Fund click here.

Resources:
Ajay Anand is the author of this article on Equity Mutual Fund.
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