Interesting Times India

It is more than an year since i returned to the blog. I thought I will pick up from where I left - the interest rates. Almost 1% cut has happened since January 2015 till date in the bank Fixed Deposit rates.

Fixed deposits of FDs may give attractive returns on paper, but with the tax payable at the current tax slab, the more one invests in FDs, the more tax one has to pay. Taking in consideration the rate of inflation over the years, it is possible that one may actually be facing a loss by investing in FDs. 

When it comes to rate of returns, FD rates are pre-specified and do not change for the entire tenure. On the other hand MF rates are affected by market conditions, hence during positive market conditions; MFs have the potential to earn high returns where as FD rates are unaffected. 

FDs are generally known for minimal risk, where as equity mutual funds carry high market risk, and debt mutual funds carry lower market risk than equity. But risks can be mitigated to a certain extent as MFs are managed by professionals. Yet, MFS are prone to market risk. But as it is said, big risks give big returns

Features can be compared and match  on your risk-return profile. 

One get 6.25% for a 5 year FD from State Bank of India from 29/04/2017 . 

However, if you are willing to assume a bit more risk, there are better ways to deal with money for events of life.

Ofcourse, each asset class has got a different flavour of risk and taxes.

If one look at consumer prices and inflation, records show that current levels are half of it was an year back. But all will agree that none of the consumer items prices have gone down. It has grown up only. that makes poverty a reality for common man.

Here is where the need to assume a better level of risk.

Assets managed by the Indian mutual fund industry have grown from Rs. 13.86 trillion in April 2016 to Rs. 19.11 trillion in April 2017. That represents a 38%growth in assets over April 2016.

One gets all shades of risk from mutual funds, rates fluctuate with underlying market on a daily basis.

Balanced Funds, Pure Debt funds, Gilt Funds like that the list goes on. Now a days you get a pinch of gold also in some schemes.

It is  difficult to begin only. Once you understand how to navigate, you will surely like it. Make Mutual Funds part of your portfolio. there is great opportunity to earn better inflation adjusted rate  of return

happy investing