Floater Funds offers different types returns based on the market performances and benchmark indices. These funds comprise of debt securities, and they consist the liability of issuing entities and they invest in corporate bonds, treasury bills, Certificate Deposits, and other debt tools. These funds return completely depend on the market rates, if the interest rate rises the floater fund returns also increases and in counter any downfall in the interest rates then it will affect the returns like there will be the risk of lower returns. It is always recommended to invest in such debt mutual funds by knowing their features, the main thing to be considered that the returns are dependent on the market performance and the interest rates. The relationship between these is directly proportional. If the rates fluctuate either rise or fall similarly the return value will also be increased or lowered, respectively. It is best to invest in these funds when the interest rates are higher this will help you gain more returns with lower risks. As this scheme offers comfortable tenure investor can choose accordingly.
What are the Features of Floater Funds?
Portfolio:
The debt floater mutual funds investment portfolio invests in both private and government companies about 65% of the corpus.
Risks:
When we talk about risks these funds have limited risks, though it is linked to the market performances as they invest their corpus in debt securities that mitigates the risks substantially.
Tenure:
Short term plan is for 1 year and these types of funds invested in government securities, example treasury bills, certificates of deposits. Long term tenure plans are for more than 1 year and these are invested in corporate bonds, government bonds, etc.
Taxation:
Two types of tax are applicable if the holding period is less than 3 years then it is the short-term capital gain tax and if the holding period is more than 3 years then the long-term capital gain tax was applicable.
What are the advantages of Floater Debt Funds?
- They offer higher returns.
- Lower risks
- Open ended scheme
- Comfortable Holding period