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The year 2020 had one silver lining —investors with diversified portfolios registered handsome gains. Among debt funds, longer-duration funds outperformed; among equity funds, mid- and small-cap funds fared better. For 2021, in keeping with the law of mean reversion, analysts have modest return expectations from last year’s outperformers.
Debt funds: Be wary of credit risk
In 2020, longer-duration debt funds gave good returns as interest rates fell. Returns from shorter-duration funds were muted. Credit risk funds underperformed. Events like liquidity seizure in the debt market and the closure of six debt funds of Franklin Templeton Mutual Fund brought home the
