As the name suggests, Floater Funds are those Debt Securities (or Bonds) which provides a varying rate of returns depends on market fluctuations, benefits investors on business cycles.
As Repo rate Rises (the rate at which scheduled commercial and public sector banks procure loans from the RBI) indicates an increase in the returns generated by zero risk instruments and government bonds, thereby increasing the yield of a debt floater mutual fund.
If interest rates goes up, then bond prices move down and reduces returns for the investors and vice a versa.
- High Returns with Less Risky.
- Annual Returns: 6% - 9%.
- In the last 5-years, floater funds have delivered average returns of 8.27%.
Floater funds are of two different types- short-term and long-term. As the name suggests, short-term funds invest in debt securities that have shorter maturities. You will see most such funds investing in high-liquidity instruments such as government securities, deposit certificates, and T-Bills.
Apart from having securities with longer maturities, long-term floater funds are generally known to be more diversified with their portfolio composition. They invest in floating interest instruments along with considerable investments in the money market or fixed interest instruments.
It is recommended that risk-averse investors wanting to earn returns higher than mutual funds that offer fixed returns should invest in floater funds. But do note that the returns from floater funds depend on the market conditions. The RBI is responsible for adjusting the repo rate as per the economic condition of the country.
- Taxation Policy on Floater Funds: Floater Funds are taxed just like any other debt mutual fund in India.
- For a holding period of less than 3 years, Short Term Capital Gains (STCG) is levied, which is according to the income tax slab of investors. If an investment is held for more than 3 years, Long Term Capital Gains Tax is levied, which currently stands at 20%, with the benefit of indexation.
Best suggested Monthly Dividend (IDCW - Income Distribution cum Capital Withdrawal) Floater MFs:
DEBT
MUTUAL FUNDS (Invest in GOVT. SECURITIES) - MONTHLY DIVIDEND PAYING (4% - 9%
Returns) |
INCEPTION |
IDCW
(per UNIT) Rs. |
NAV
(29-July-2021) |
Aditya
Birla Sun Life Floating Rate Fund |
23-Oct-2009 |
0.61 |
100.84 |
Nippon
India Floating Rate Fund |
27-Aug-2004 |
0.04 -
0.10 |
11.03 |
HDFC
Floating Rate Debt Fund |
23-Oct-2007 |
0.04 -
0.06 |
10.16 |
ICICI
Prudential Floating Interest Fund |
16-May-2013 |
0.3 -
0.7 |
102.65 |
Kotak
Floating Rate Fund |
14-May-2019 |
3.56 -
11.38 |
1073.24 |
IDFC
Floating Rate Fund |
18-Feb-2021 |
0.01 -
0.04 |
10.03 |
Tata
Floating Rate Fund |
07-July-2021 |
0.01 -
0.04 |
10.03 |
Axis
Floater Fund |
29-July-2021 |
1.5
- 9 |
1001.05 |
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