What are the disadvantages of investing in Target Maturity Funds?

What are the disadvantages of investing in Target Maturity Funds? zoom-icon

Target Maturity Funds (TMFs) are a kind of open-ended debt funds that offer you fixed maturity dates. The portfolios of these funds carry bonds whose expiry date is aligned with the fund’s target maturity date and all the bonds are held to maturity. While this helps in lowering interest rate risk and makes returns more predictable, investors must keep in mind the drawbacks of TMFs before investing in these funds.

Target Maturity bond funds are a new category of debt fund and hence there are few options available in this space. This may limit the choice of maturity available to an investor i.e investors keen on a specific maturity horizon may not be able to find a suitable fund. Also, the category doesn’t have any performance track record to rely

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