IL and FS Debt schemes

Investment Objective

IL&FS Debt Mutual Fund's objective is to provide investors a great exposure to invest in infrastructure industries and maximise their risk-adjusted returns. IL&FS Mutual Fund is a part of Infrastructure Leasing and Financial Services Limited, one of the first companies to offer Infrastructure Debt Funds (IDFs). Typically, infrastructure debt funds consist of bonds or loans issued by companies involved in developing, maintaining, or operating infrastructure projects such as roads, bridges, power plants, airports, etc.

Risks Involved in IL&FS Debt Mutual Fund

Following is a list of risks you may consider in IL&FS Debt schemes.

Dynamic Interest Rate:

The risk of this ever-changing nature of market interest rate. When interest rates go up in the market, the prices of bonds usually go down, which can lead to possible losses in the investment. On the other hand, when interest rates go down, bond prices often go up.

Uncertainty of Credit:

The risk that borrowers make delay or struggle to repay the money. For instance, suppose a borrower fails to pay the interest or principal amount on time. Thus can adversely affect the value and liquidity of the debt fund.

Lack of Liquidity:

The risk of not being able to sell or buy debt securities on time or at a fair price. And, it ultimately leads the fund manager to sell the securities at a lower price, resulting in a loss for investors.

Poor Portfolio:

The risk of having a high focus on a single company or instrument within the debt fund portfolio. This generates a context that your fund largely depends on specific events or factors, making your investment in more risk.

Return Potential of IL&FS Debt Mutual Fund

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

Who Should Invest in IL&FS Debt Mutual Fund?

Debt mutual funds are a good choice for investors who don't want to deal with the big risks and volatility like an equity mutual fund. Typically, these funds can give better profits than regular fixed-income options like bank fixed deposits or post office savings plans, especially if you're in the higher tax groups. Another good thing about debt funds is that you can easily get your money back whenever you want, without any extra charges or waiting time.

Things To Consider Before Investing in IL&FS Debt Mutual Fund

Before investing in  IL&FS Debt mutual fund, there are some things that you should consider, such as:

• Your risk appetite: These risks may include interest rate risk, credit risk, liquidity risk, and portfolio concentration risk.
• Your investment duration: You must have a clear understanding of your desired investment duration, and you should choose the IL&FS Debt Mutual Fund that perfectly aligns with your investment horizon.
• The fund portfolio: You must scrutinise the fund portfolio which may encompass the fund’s past performance, details regards the the fund house, information about the fund manager, and more.
• Your financial goals: Debt funds must aid in reaching different financial goals like buying a home, car, etc. Hence, it is advisable to choose your IL&FS Debt schemes that match your goal.

Tax on IL&FS Debt Mutual Fund

The tax implications of investing in the IL&FS Debt Mutual Fund depend on how long you hold it and your income tax slab. If you sell the fund after 3 years from the purchase date, you'll have to pay long-term capital gains tax. The tax rate for long-term capital gains is 20% with indexation benefits. On the other hand, if you sell the fund before 3 years from the purchase date, you will need to pay short-term capital gains tax. This tax rate will be the same as your income tax slab rate, and there won't be any extra tax added.