Know About Investing In Debt Funds Online in India at Mirae Asset

1. Investing in Debt Funds

2. What do you need in a portfolio? Diversification Real Estate and Gold Fixed Deposit High Safety Growth & Steady returns Debt Mutual Fund or securities Wealth creation Equity, Equity Mutual Funds and Exchange Traded Funds 1 Mirae Asset Mutual Fund

3. Identifying Need for Debt Investments When the horizon is short When the investor is risk averse Liquid component 01 02 03 Money that may be for short term or emergency needs, Debt should be considered If investor is investing for a need after 3 or 6 months, Debt can be considered Balancing portfolio risk If investor is allocating for buying a flat or car after 5 years, equity or long term debt funds may be considered depending on risk appetite If the investor does not want volatility in investments Systematic transfer or withdrawal 2 Mirae Asset Mutual Fund

4. Goals in Life Aren’t these our goals as well? What are the goals we save for? We usually invest for long term goals but not everything is long term. As an investor, one needs to achieve short term goals in the journey to reach long term goals. 3 Mirae Asset Mutual Fund

5. Access to smooth cash flows for recurring short term needs helps one allocate enough to achieve long term goals

6. Factors to be considered before choosing a fund Risk Appetite Investment Tenure 5 Mirae Asset Mutual Fund

7. Risk Appetite Before Investing one should consider the following: 1. Risk and return are directly related. 2. Risk can be Interest Rate risk or Credit risk 3. One can look at funds riskometer and Potential Risk Class (PRC) to know the risk profile of the fund. Risk Return Potential Risk Return Potential 6 Mirae Asset Mutual Fund

8. What is risk in debt funds? Each product has risk attached to it for instance, Fixed Deposit has risk of issuer default, equity has risk of volatility. In general terms, higher the risk higher the return potential. Similarly, Debt mutual funds have risk in it. Depending on type of debt mutual fund this risk increases or decreases. Mostly, there are two type of risk considered in debt mutual fund: Interest rate risk - Prices of fixed income securities are inversely related to interest rate changes. If interest rate goes up, price decreases and vice versa. One has to invest in strategy that benefits the current interest rate scenario and protect capital loss due to change in rate. Credit Risk - Credit risk refers to risk of default i.e. failure to pay interest and / or the principal by the issuer of the fixed income instrument. If credit rating of an instrument gets downgraded, the price of instrument will fall. Likewise, if the credit rating gets upgraded, the price will rise. 7 Mirae Asset Mutual Fund

9. Interest rate risk is temporary while credit risk is permanent Interest rate movements are always in cycles – periods of rising interest rates are followed by periods of falling rates. If you have a long investment horizon, you will be able to ride out the volatility due to interest rate changes. However, if the issuer defaults on interest and maturity payments then the price of the instrument will be written down permanently. Therefore, credit risk is often permanent and investors should aim to minimize this risk. Staying invested through interest rate cycle can give better investment experience. Yield and Interest rate 10.00 10 Years G-Sec Repo Rate 9.00 8.00 7.00 6.00 5.00 4.00 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-20 Apr-21 Apr-22 8 Mirae Asset Mutual Fund Source: Bloomberg, as on 17th May, 2022

10. Investment Tenure Investment tenure influences your risk capacity. Longer the tenure, higher will the risk capacity. One should try to match the duration profiles of your investment with your investment tenure 10 years 3 months 30 Years 1 year 5 Years High Risk Low Risk Debt Mutual funds has different product based on investment tenure: • For very short investment tenures (few days / weeks / months) - overnight funds or liquid funds. • For 1 – 3 year investment tenures - short duration funds or similar funds whose duration profile is less than 3 years. • For 3 years plus investment tenures - dynamic bond funds and Gilt funds. 9 Mirae Asset Mutual Fund

11. About the Funds Debt Fund Goal Recommended Tenure Ultra Short Term Fund For short term goals 6- 9 Months Savings Fund For short term goals 9 Months – 1 Year Money Market fund For short term goals 1 years – 1.5 Years Short Term Fund For medium term goals 1.5 Years – 2.5 Years Banking and PSU Debt Funds For medium term goals 2.5 Years – 3 Years Corporate Bond Funds For medium term goals 2.5 Years – 3 Years Dynamic Bond Funds For Long term goals 3.5 Years – 5 Years Gilt Fund/ long duration Funds are categorised as per SEBI categorisation circular 2017 For Long term goals 5 years and above 10 Mirae Asset Mutual Fund

12. SIP in Debt funds SIP – Systematic Investment Plan 11 Mirae Asset Mutual Fund

13. Market cycles in debt How do we invest in equity? We do SIP to benefit from volatility or invest at every market dip. Equity market goes through different bullish-bearish cycle and both are important for generating returns. Similarly, debt market goes through different phases based on interest rate cycle and each one is important to generate returns. Falling Interest rate Yield and Interest rate 10 Years G-Sec Repo Rate 10 Years G-Sec Repo Rate 8.00 9.50 7.50 9.00 7.00 6.50 8.50 6.00 8.00 5.50 5.00 7.50 4.50 4.00 7.00 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 In the falling interest rate scenario, yields fall and price of In the rising interest rate scenario, yields raises and price bond increases. So locking in a high yield and holding it of bond decrease. So investing in short term funds or can be one of the appropriate strategy for investor. doing SIP in the long term funds can be one of the appropriate strategy for investor. 12 Mirae Asset Mutual Fund

14. Key Points Things to keep in mind while selecting debt fund Risk appetite –look at the credit risk a fund can take and does it match with your risk profile See which product is more appropriate for your investment tenure Use strategy based on interest rate cycle 13 Mirae Asset Mutual Fund

15. Lets understand through Case Study 14 Mirae Asset Mutual Fund

16. Profile Investment Behaviour 40 years old man with a wife and a Risk averse only invest in FDs 16 years old child Goals Risk appetite Child education in 3 years Low Product for Investment Banking and PSU debt Fund Because this fund invest 80% in Banking and PSU papers (as per SEBI categorization), which are generally high quality liquid securities. (can also consider Short Duration Fund/ Corporate Bond Fund if have potential for slightly higher risk) 15 Mirae Asset Mutual Fund

17. Profile Investment Behaviour Understands the market risk and ready to take risk 30 years old single woman with a stable job Risk appetite Goals High Trip within a Year Product for Investment Low Duration Fund Because this fund invest in higher maturity papers also but maintain the duration within 6-12 months, as investor is ready to take risk, this fund may generate higher returns comparatively with a investment horizon of 1 year. (can also consider Money Market if looking for slightly lower risk) 16 Mirae Asset Mutual Fund

18. Disclaimer An Investor Education and Awareness Initiative by Mirae Asset Mutual Fund . All Mutual Fund investors have to go through a one-time KYC (Know Your Customer) process. Investors should deal only with Registered Mutual Funds (RMF). For further information on KYC, RMFs and procedure to lodge a complaint in case of any grievance, you may refer the Knowledge Center section available on the website of Mirae Asset Mutual Fund. The information contained in this document is compiled from third party and publically available sources and is included for general information purposes only. There can be no assurance and guarantee on the yields. Views expressed by the Fund Manager cannot be construed to be a decision to invest. The statements contained herein are based on current views and involve known and unknown risks and uncertainties. Whilst Mirae Asset Investment Managers (India) Private Limited (the AMC) shall have no responsibility/liability whatsoever for the accuracy or any use or reliance thereof of such information. The AMC, its associate or sponsors or group companies, its Directors or employees accepts no liability for any loss or damage of any kind resulting out of the use of this document. The recipient(s) before acting on any information herein should make his/her/their own investigation and seek appropriate professional advice and shall alone be fully responsible / liable for any decision taken on the basis of information contained herein. Any reliance on the accuracy or use of such information shall be done only after consultation to the financial consultant to understand the specific legal, tax or financial implications. Mutual fund investments are subject to market risks, read all scheme related documents carefully. Please consult your Financial Advisor and Mutual Fund Distributor before investing 17 Mirae Asset Mutual Fund

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