Banking and PSU mutual funds gain popularity for safety

Mutual fund advisors recommend Banking and PSU debt funds for those seeking relatively safe investments. These funds mainly invest in bonds from banks and public sector companies. Because many of these entities are government-backed, they come with less credit risk. Over the past few years, these debt schemes have gained popularity. Many investors became cautious after experiencing downgrades and defaults in the debt market. As a result, some chose to avoid debt schemes altogether, fearing they might not get their money back. Despite their safety, these funds are not without risk. They can also invest in bonds issued by private banks, which do not have government support. However, because banks are heavily regulated, the risk is considered low. It’s important to note that interest rates can impact these funds. Rising interest rates can hurt their performance, but experts believe rates may drop later this year as inflation slows. If you plan to invest for about three years and understand the potential risks, consider Banking and PSU debt funds. Some recommended options include DSP Banking & PSU Debt Fund and Axis Banking & PSU Debt Fund, both of which have shown good performance recently. It is advisable to keep an eye on monthly updates to stay informed about these investments. Remember, past performance does not guarantee future success.