All of the above

Don’t be disheartened, you got at least 1 right. For a fact, all the options are correct. You appear to be new to debt funds. No problem! Here’s your chance to know more. Debt funds offer high liquidity where you can buy / sell any day at a publicly disclosed price. In most cases, they don’t even carry any penalty for early withdrawal. The best part of course, is that that if you hold them for more than 3 years, you can take cost indexation benefit to pay much lower tax.

Don’t be disheartened, you got at least 1 right. For a fact, all the options are correct. You appear to be new to debt funds. No problem! Here’s your chance to know more. Debt funds offer high liquidity where you can buy / sell any day at a publicly disclosed price. In most cases, they don’t even carry any penalty for early withdrawal. The best part of course, is that that if you hold them for more than 3 years, you can take cost indexation benefit to pay much lower tax.

Don’t be disheartened, you got at least 1 right. For a fact, all the options are correct. You appear to be new to debt funds. No problem! Here’s your chance to know more. Debt funds offer high liquidity where you can buy / sell any day at a publicly disclosed price. In most cases, they don’t even carry any penalty for early withdrawal. The best part of course, is that that if you hold them for more than 3 years, you can take cost indexation benefit to pay much lower tax.

Brilliant! You are a pro investor. Indeed, debt funds offer high liquidity where you can buy / sell any day at a publicly disclosed price. In most cases, they don’t even carry any penalty/exit load for early withdrawal. The best part of course, is that that if you hold them for more than 3 years, you can take cost indexation benefit to pay much lower tax.

Decrease

This was a tough nut! This is not at all an easy concept to grasp. Very few people actually understand the mark to market concept in mutual funds. Actually, for a lay investor, it is counterintuitive too. Unlike traditional investments, where the base price has no impact with increase or decrease in interest rates, debt funds are impacted. The fact is that when interest rates rise, the market price of the debt fund is likely to decrease. The vice versa is also true.

Super work! You are a master! This is not an easy concept to grasp. Very few people actually understand the mark to market concept in mutual funds. The fact is that when interest rates rise, the market price of the debt fund is likely to go down. The vice versa is also true.

This was a tough nut! This is not at all an easy concept to grasp. Very few people actually understand the mark to market concept in mutual funds. Actually, for a lay investor, it is counterintuitive too. Unlike traditional investments, where the base price has no impact with increase or decrease in interest rates, debt funds are impacted. The fact is that when interest rates rise, the market price of the debt fund is likely to decrease. The vice versa is also true.

False

Lots of basics to catch up, eh! Government / Sovereign bonds come with the guarantee of the government to honour payments. There is no credit risk there. In fact, if you are looking for a debt fund with no credit risk, ensure that it holds only Government Bonds.

Perfect! You shine! Government / Sovereign bonds come with the guarantee of the government to honour payments. There is no credit risk there. In fact, if you are looking for a debt fund with no credit risk, ensure that it holds only Government Bonds.

Medium Duration Funds

Did you misread the question? You had to point the exception. Well, you have the benefit of doubt. It is the Medium Duration funds that can be risky for a time horizon of less than 1 year. The change in interest rate environment could make this fund category volatile. Instead, you can opt to invest in Liquid, Ultra Short or Low Duration funds.

Did you misread the question? You had to point the exception. Well, you have the benefit of doubt. It is the Medium Duration funds that can be risky for a time horizon of less than 1 year. The change in interest rate environment could make this fund category volatile. Instead, you can opt to invest in Liquid, Ultra Short or Low Duration funds.

Did you misread the question? You had to point the exception. Well, you have the benefit of doubt. It is the Medium Duration funds that can be risky for a time horizon of less than 1 year. The change in interest rate environment could make this fund category volatile. Instead, you can opt to invest in Liquid, Ultra Short or Low Duration funds.

Looks like you are a fund manager yourself. Indeed, Medium Duration funds can be risky for a time horizon of less than 1 year. The change in interest rate environment could make this fund category volatile. Instead you can opt to invest in Liquid, Ultra Short or Low Duration funds.

Credit rating profile

Well, this is not a surprise. Most investors fall for past returns and ignore the more important thing, credit rating profile. Past returns, specially as the only selection criteria, can be misleading. And if there is just one parameter to choose for the retail investor, it should be the credit rating profile of the portfolio. Ideally, one can opt for the highest credit ratings.

Hey savvy investor, you get full marks! Past returns, specially as the only selection criteria, can be misleading. And if there is just one parameter to choose for the retail investor, it should be the credit rating profile of the portfolio. Ideally, one can opt for the highest credit ratings.

3 years

Missed it! Cost indexation benefits are available for long term capital gains. And yes, it gets pretty confusing. So, the right answer is that for cost indexation benefits in debt funds, you should hold your investment for at least 3 years.

Missed it! Cost indexation benefits are available for long term capital gains. And yes, it gets pretty confusing. So, the right answer is that for cost indexation benefits in debt funds, you should hold your investment for at least 3 years.

Bingo! Cost indexation benefits are available for long term capital gains. And yes, it gets pretty confusing with but you got the right answer, so rejoice!