Actual returns may not match YTM: What factors should you consider for choosing a debt fund?

While choosing a debt scheme for investment, consider the interest rate scenario, average maturity, credit rating of portfolio securities, yield to maturity, etc.

In the last one year, the interest rates on most fixed-income instruments, such as fixed deposits, government securities, corporate bonds, etc., have gone up. Fixed-income investors are comparing the expected returns on various debt mutual funds to decide which one to invest in. They are also comparing the expected returns on debt funds with other fixed-income instruments such as fixed deposits. One of the important tools to calculate the expected returns on debt funds is the yield to maturity or YTM. In this article, we will understand what is yield to maturity, how to calculate it, its importance and its limitations. What is yield to maturity? In simple terms, the yield-to-maturity from a bond investment is the total return that an investor can expect ...

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