Post COVID-19 world has not been any good for anyone, and it has been equally harsh for the investment sector, specially FD. The fixed deposit interest rates started dipping every month and has touched a new low. Every new RBI notification was closely watched in anticipation of further loss in the interest income. This has come as a shocker to the people who have invested a good deal of money on the Fixed Deposits. Fixed deposits only offer a moderate interest rate which a few people always maintain does not cover the inflation aspect.
In this article, we will try to fathom the solution for this slump in rates and how to come in these troubled times. If you traversed with us till the end of this blog, you will have guidelines on making your way in the amid the COVID 19 and economic woes.
As the same goes do not put all the eggs in one basket, one of the major principles of the investment is individuals must not invest in one product, he should diversify his investment portfolios. The diversified portfolio makes sure that even if the situation is worse and most products are not providing the expected returns there are always a few which are. Similarly, individuals must make sure that he is not solely reliant on just FD and is investing several other products to be on the safer side. One of the better alternatives is Debt Mutual Funds:
Debts Mutual funds
Debts Mutual funds are the financial instruments that invest in fixed-income investments like bonds issued by the government and corporate, debt securities, and money market instruments, etc. This instrument is called the fixed income securities as the investor is sure about the return on them, the security is immune the market volatility.
Benefits of Debts Mutual Funds
1.Insulated from market risk
Debt mutual funds are the securities which are immune to market risk and are not impacted by the market volatility. Thus, they provide a sense of assurance to the investor.
The investment is debt is highly liquid, and an investor can always rely on it as an emergency fund.
3.Suits conservative investor
Debt mutual funds suit conservative investor as the risk factor associated with them is low.
4.Helps in achieving short term investment goals
Debt Mutual fund is a short term investment and can be used to build a decent corpus.
Factors which constitutes as the best debt funds
There is no readymade formula for choosing the best debt fund and It is challenging to explain what should be the exact process for selecting the best debt fund. However, individuals must consider in are a few things evaluating the funds
Returns: Individuals must go through past performance and must observe which funds have performed consistently. There might be a pattern which will assist one to carefully analyze the mutual fund and see if it is suited to your requirement.
Read the offer document carefully: Any mutual fund investment is a significant commitment. Individuals must make sure that all the necessary information available with the offering document has been evaluated with the investment objectives.
Expense Ratio: Higher expense ration can make one’s investment costlier as the fee is deducted from the returns. Check the expense ratio associated with the debt fund and try to choose a fund with a lower expense ratio. It would mean that the performance would be more significant.
Past performance: Tracking the performance history of the debt fund is of considerable significance. It is always good to invest with fund houses that are established and well-known. The investment decisions taken by the fund manager are more likely to align with your investment goals.