Money Money Money: How risky are your debt mutual funds?

The world of debt mutual funds has gone through a major churn over the last 15 months. Some new regulations have come in and a lot of first timers who were just beginning to dabble in this new universe of debt mutual funds are fairly confused.

This week, CNBC-TV18 spoke with Nasser Salim, Managing Partner at Flexi Capital, to discuss the debt mutual funds threadbare and the risks associated with such products.

“It is very important for investors to understand the risk they are willing to take. Fixed deposits don't come in with much of a risk. Investors should be educated about these risks,” Salim said.

“In ICL terms, which is interest rate risk, credit risk and liquidity risk, these three risks are pertinent and will remain always relevant when you chose a particular debt fund,” he observed.

Salim pointed out that the interest rate is associated with the economy and with change in interest rates, the return can also change. "Credit risk is basically betting on credit; basically you are betting on a particular bond or debenture which could be rated AA or A in order to optimise your return. Liquidity risk is very relevant and which has been hit the hardest in the last few weeks and in the last one year,“ he said.