INCOME SCHEMES

INCOME SCHEMES

Income schemes invest their assets into debt instruments that are either of medium to long term in duration. This means that the scheme will invest the money into debt instruments that mature after a few years and these can stretch to several years.

In terms of the choice available for the fund manager there are bonds, debentures, government securities and other debt instruments. Typically most of these schemes hold a mixture of bonds, debentures, gilts and even short term securities in their portfolio and they keep changing the mix depending upon the fund managers outlook for the future.

These schemes are steady in the growth that they witness and hence one should expect returns aligned to the performance of the debt market, which means that under steady conditions it should give reasonable returns and the risk to capital is accordingly lower. However the returns of the scheme turn negative when rates rise and positive when t he rates fall in line with the behaviour of the debt instruments.