Groww debt mutual fund

Investment Objective

The primary objective of a Groww debt mutual fund is to provide regular income and capital appreciation to investors while maintaining liquidity and safety. This is achieved through strategic investments in a range of debt and debt-related instruments, varying in terms of maturities and credit ratings. Notably, as of August 2023, Groww Debt Mutual Fund has a total AUM (assets under management) of Rs 517 crores.

Risks Involved in Groww Debt Mutual Fund

In fact, the Groww Debt fund risk is relatively lesser than that of equity. Although, there are certain risks entailed in the Groww debt mutual fund. Let’s scroll down and take a look at the risks involved in Groww debt schemes.

Interest Rate Risk:

This is the risk of losing value due to fluctuations in the market interest rates. For instance, bond prices tend to decrease when interest rates rise in the market, resulting in potential capital losses. On the other hand, when interest rates fall, bond prices often increase.

Credit Risk:

This is the risk of default or delay in payment by the borrowers. I.e., if a borrower fails to pay the interest or principal amount on time, it can adversely affect the value and liquidity of the debt fund.

Liquidity Risk:

This is the context of being unable to sell or buy debt securities quickly enough. Doing so may lead the fund manager to sell the securities at a lower price than their fair value, resulting in a loss for the fund and its investors.

Portfolio Concentration Risk:

This is the risk of having a high focus on a single company, sector, or instrument within the debt fund portfolio. This can expose the fund to higher volatility and lower diversification, as the fund's performance largely depends on specific events or factors.

Return Potential of Groww Debt Mutual Fund

Let’s take a look at the Groww Debt return for the past one year, three years, and five years are as follows:

Who Should Invest in Groww Debt Mutual Fund?

Debt mutual funds are generally suitable for conservative investors who do not want to take high risks or volatility associated with equity funds. Debt funds offer better returns than traditional fixed-income products like bank fixed deposits or post office savings schemes. Debt funds also have the advantage of liquidity, which means that investors can withdraw their money at any time without any penalty or lock-in period.

Things to Consider Before Investing in Groww Debt Mutual Fund

Before investing in Groww Debt Mutual Fund, there are certain things that you should consider, such as:

Your Risk Appetite

In general, debt funds are considered less risky; however, they are not entirely free of risk. These risks include interest rate risk, credit risk, liquidity risk, and portfolio concentration risk. Hence, before investing, it is essential to have a thorough understanding of the risks you may encounter in the future.

Your Investment Horizon

Your investment horizon might depend on your financial goals, risk appetite, and liquidity needs. In general, longer-duration funds are more sensitive than shorter-duration funds due to the uncertainty of market interest rates. To alleviate this risk, you should match the duration of the Groww Debt mutual fund with your investment horizon.

The Fund Portfolio

The fund portfolio entails details regards the the fund house, its past performance, who manages the fund, etc. You can also compare the Groww Debt return with its benchmark over different time frames such as 1 year, 3 years, and 5 years. By doing so, you clearly understand your investment company(fund house) and the pertinent people.

Your Financial Goals

Debt funds can help you achieve various financial goals. It may include saving for a vacation, buying a car, purchasing a new house, creating a retirement corpus, etc. So, matching your financial goal with the Groww Debt return is advisable.

Tax on Groww Debt Mutual Fund

The tax implication of investing in Groww debt mutual fund depends on the investor's holding period and income tax slab. Long-term capital gain tax will be applicable if the fund is sold after 3 years from the purchase date. The tax rate for LTCG is 20%, with indexation benefits. On the other hand, short-term capital gain tax will be applicable if the fund is sold before 3 years from the purchase date. The tax rate for STCG is the same as the income tax slab rate of the investor; no additional tax would be imposed.