This Investment Beats FDs 80% Of The Time🤯💰
Heyy
The good old Fixed Deposit has been the go-to investment for generations. Would you believe me if I said, FDs used to give a double-digit return even in Nationalized banks? Well, those days are behind us, but tell me something…
What I was up to: This week, Niyati & I were invited to attend the ResearcHER event hosted by Motilal Oswal and it was cerebrally stimulating to hear women in the field of Stock & Finance research drop value bombs of insider information.
Later in the week I had so much fun at a friend’s wedding and the highlight for me (apart from seeing my friend getting married, literal chills there!) was playing Holi before time, hahahah!
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Market ka haal: The Indian benchmark indices extended gains for the second consecutive session on Thursday. 📈 Sensex was down 0.01 percent at 74,332.58, and Nifty was up by 0.03 percent at 22,552.50, ending flat amid volatility, pausing after two consecutive sessions of gains.
The global market is experiencing heightened uncertainty due to U.S. tariff impositions and counter threats from its peers. With continued foreign outflows and slowing earnings growth, near-term volatility is likely to persist. But hey, it's not all doom and gloom! 😎 Indian markets have demonstrated resilience of late despite the looming trade war. The ongoing correction in equity markets has led to a significant valuation adjustment, presenting selective accumulation opportunities for investors.
Plus, historically, March has been a good month for the markets, with positive returns in 7 out of the last 10 years. 📊 Buckle up, buttercup! 🚀
Humara Gyaan: While FDs may seem to you like the easiest, safest, quickest way to park money, with the repo rate cut to 6.25%, banks might follow suit and lower FD interest rates soon. So, do you grab the current rates or look for better options?
Historically, debt funds have beaten FD returns in 70-80% of cases over 1-3 years. Right now, target-maturity funds offer a 6.9-7.1% yield to maturity—pretty close to FD rates but with better tax efficiency.
💰 Why Debt Funds Have an Edge:
📈 Tax Deferral Advantage: Like FDs, debt funds are taxed as per your income slab. But, taxation only happens when you redeem, giving your money more time to compound.
🚪 No Premature Exit Penalty: Unlike FDs, debt funds don’t lock you in. You can withdraw anytime without a penalty.
Of course, no investment is risk-free. Debt funds have:
📉 Interest Rate Risk: If interest rates go up, bond prices drop—bad news for long-term debt funds. Shorter-duration ones handle this better.
⚠️ Credit Risk: Some funds invest in lower-rated bonds, which means there’s a chance of defaults. Stick to AAA or AA-rated options if you want to sleep peacefully.
So, what should you do?
If guaranteed returns and capital safety matter most to you, locking in an FD now makes sense—especially if you don’t need the funds anytime soon. But if you’re open to a bit more flexibility and want higher returns and subsequent tax efficiency, debt funds might be worth considering.
Go for short-duration funds for liquidity because they invest in bonds maturing within one to three years, making them relatively stable. Invest in target-maturity funds or TMFs for predictable returns because they hold bonds till a fixed maturity date, making returns more predictable. Currently, they offer 6.9-7.1% returns, which is on par with FDs.
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I know you work so hard for your money. It’s only fair if your money works for you too, nah? As Warren Buffett says, “Risk comes from not knowing what you’re doing.” Whether you stick to FDs or venture into debt funds,plese remember, there really are no right or wrong answers. Pick what works best for you and your hyper-personal financial position.
Here’s to finding YOUR answer🍻
Sayali❤️
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