Overview of Capital Market
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- Indicator Nivesh®
- Proprietor - Pratik Marathe, MBA, CFA
Worried about falling rates of bank fixed deposits? Shift to debt funds.
Hey, falling rates of bank fixed deposits have raised many retail investors worries about generating higher returns? No worries at all, debt fund / bonds are the alternative for you. Recently, debt funds / bonds have gained significant traction among retail investors over the last few years due to higher return. Investors who know for sure that they won't need the money for defined time should go for FDs. However, those who want flexibility, higher return and liquidity should stick with debt funds. Debt funds can be redeemed on any business day while breaking a fixed deposit typically entails an interest rate penalty of 1%. It is very important to choose a fund with high credit quality to avoid any credit risk. Credit risk refers to the probability of default in principal and/or interest repayments by issuers of debt securities. Investors can reduce this risk by investing in debt funds having maximum exposure to sovereign/quasi-sovereign debt papers and/or to the highest-rated corp...
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