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Volatile market? Invest in debt funds, fixed-income savings instruments

Volatile market? Invest in debt funds, fixed-income savings instruments

If you have not cushioned your portfolio with low-risk debt securities, this is the time to get locked into fixed-income instruments.

Have the markets bottomed out? For a change this question is directed not at the equity market but at the bond market, which has been under severe pressure due to rising interest rates offered by banks that make government and corporate bonds less attractive.

Low bond prices and rising bank deposit rates are an opportunity for investors to park money in debt instruments, be it bank and corporate fixed deposits (FDs), debt funds or government small savings schemes.

If you have not cushioned your portfolio with low-risk debt securities, this is the time to get locked into fixed-income instruments. Here's why: One-year bank FDs are paying a high 9-9.25 per cent interest, corporate FDs are offering two-three percentage points more than this, and yields on securities in which debt funds invest are at 9-9.5 per cent.

That's not all. The government has sweetened the offer on small savings schemes. If you invest now, you can earn 8.6 per cent interest on PPF and 8.4 per cent on five-year NSCs as against 8 per cent earlier on both.


8.6 per cent
The revised interest rate on Public Provident Fund deposits

9.5 per cent
The average interest rate on bank fixed deposits of one-year maturity

12.5 per cent
The highest interest rate being offered on company fixed deposits of three-year maturity