A strategy to make the most of volatile debt markets

The dictionary defines strategy as a plan of action or policy designed to achieve a major or overall aim. And when it comes to money matters, having a strategy surely helps.

It’s common knowledge that when it comes to equities the disciplined approach of SIPs really work.

In fact, today’s Business Standard notes, that when it comes to beat the volatility of debt markets following an accrual strategy works well.

Simply put, accrual strategy is when you buy a bond and hold it to maturity, and make an earning from the accruing of interest. Thanks to the apex bank’s liquidity tightening measures, it’s getting difficult to deal with volatility in the debt market.

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In fact, if you are the type of investor who invests directly into bonds, you could look at funds which follow the accrual strategy approach, like the ultra short funds. Also, while following the accrual approach ensure that the modified duration of the debt fund is less than two years.

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Did you know that Fixed Maturity Plans (FMPs) are to follow an accrual strategy? After all, they are closed ended funds and come with a duration of one or two. These are a few things to know about accrual strategy.

For more information read the full Business Standard story here.