Investment options you can look at beyond bank fixed deposit (FD)
Premium- According to tax and investment experts, one should look at the bond market for diversification of one's portfolio
Amid lowering bank fixed deposit (FD) interest rates, investors with low risk appetite are looking for investment options that can yield higher returns (both in short-term and long-term). According to tax and investment experts, one should look at the bond market for diversification of one's portfolio. They said that when bank FD interest rates are at record low of near 5 per cent, bond funds like short term bond funds and Government of India (GoI) floating rate bonds can be good option for an investor who can't afford to take high risk.
Speaking on the bond option that can yield higher than bank FD in short-term Pankaj Mathpal, Founder & CEO at Optima Money Managers said, "In the wake of Covid-19 pandemic, bank FD rates have come down to the record low of around 5 per cent. In such condition, one can look at short-term bond funds or short duration funds. It's an open-ended debt instrument in which, one can invest for one year. The return one can expect from this investment is around 6 per cent per annum, which is around 20 per cent higher than bank FD interest rate."
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For long-term investors Pankaj Mathpal suggested GoI floating rate bonds and said, "For those investors, who don't have liquidity issue, can look at GoI floating rate bonds. Since, key interest rates are at its record low, the Reserve Bank of India (RBI) is expected to either keep the key interest rates unchanged or increase interest rates in upcoming RBI Monetary Policy meetings. So, the GoI floating interest rate bonds, which is currently yielding 7.15 per cent annually, will either continue to give returns to the tune of 7.15 per annum or higher from the current annual returns."
Raising the liquidity issue in GoI floating rate bonds, SEBI registered tax and investment expert Jitendra Solanki said, "GoI floating rate bonds have lock-in period of 8 years. So, it is advisable only for those investors who don't have liquidity issue and has a strong belief in invest, hold and stay long strategy."
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