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Year-end special: ‘Best returns in 2023 will come from debt mutual funds, not equity mutual funds’ | Jobs Vox

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Crystal ball gazing is always fraught with risks. But at the risk of being wrong, I’m offering my thoughts that few experts share.

In the year By 2023, the best returns will come from debt mutual funds, not equity mutual funds.

Although equity creates greater wealth in the long run, the current situation is geared towards supporting debt over equity. We believe interest rates are likely to be high in the first or second quarter, and interest rates will continue to decline. It may even happen earlier, which means that debt funds offer very high single-digit returns.

Similarly, Indian equity markets are volatile and we believe that many inflationary factors have been overvalued with inherent strengths, so a correction in valuation is a good thing for the long-term stability of equity markets.

I believe the time is right for debt based LSS to get tax benefits U/S 80C.

Currently all ELSS are equity based, why should that be? Why can’t LSS be debt based? I think the finance ministry will look into this, considering that tax saving FDs are locked in for 5 years, they will do it with a 5-year lock-in, so debt ELSS will have a level playing field. Tax saving FD. Such a move would increase retail participation in the debt market and bring much-needed retail participation and depth to debt mutual fund investment.

Here are my thoughts on the trends to look for in 2023

So, what can investors learn from the investment experience of 2022 and how can they apply it in 2023? First, debt fund returns are not as straightforward as equity. Individual investors have always known that equity returns in mutual funds are not linear but exponential. However, when it comes to debt mutual funds in some ways, that idea is not so clear-cut. Over the past twelve months, debt mutual funds have given returns of 6.50% 1% in YTM in a rising interest rate market. So while the retail investors who didn’t understand this went out with losses, those who understood this and kept investing will reap their benefits in 2023 and 2024. Equity markets are not fully connected, so US markets are down 30% from their highs. Hitting new highs in our markets. We always believe that the equity markets in India are highly correlated with the global markets, especially the US, so any fall will immediately lead to a fall in the Indian stocks as well. Post-Covid economic conditions are slightly different in each market, so the results are slightly different. So while the United States is in sharp decline, we are at an all-time high. However, some correction will be warranted at some point, nowhere near the 30% decline that US stocks have seen. So market linkages are a thing of the past.


(The author is the founder and Chief Sherpa of FinSherpa Investments.)

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