If you are one of those, whose majority of investments are parked in Bank FD, I'm sure low FD rates are worrying you too!
Bank FD is a GUARANTEED LOSS rather than gains, as expenses (or inflation) are rising faster than your Bank FD!
Thumb Rule to Investing in Bank FD
Maximum Amount: 9-12 times of your monthly expenses (treated as your emergency capital). Any more money parked in Bank FDs can prove detrimental to your finances.
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If you're looking for options where you can earn returns better than Bank FD (to at least match/ beat inflation by a small amount), and not take a lot of risk/ volatility too, Hybrid Mutual Funds are the best option for you!
What are they (Hybrid Mutual Funds)?
They invest in both
Debt - like Government securities, bank FD, corporate FDs, etc. - to give fixed income and stability to the portfolio and
Equity - or stock markets - a portion of the money is invested in stock markets - to give a small jump to the returns generated by debt
Minimum Investment Amount
As low as Rs. 1 lakh!
Return Expectation?
In the current scenario, when FD rates are at 5% p.a., investors can easily expect a return between 7-10% p.a.
Return between 7-10%? I'm looking for guaranteed returns!
Only Bank FDs offer guaranteed returns (or rather guaranteed losses)!
Here's the thumb rule: Any product offering you guaranteed returns is either giving you returns lower than inflation, or if the returns offered are higher and attractive, they're not guaranteed (some sort of risk is hidden)!
Our recommendation here is to get comfortable with a RANGE of returns and know what returns can the instrument offer in the WORST of the times (like March 2020) and the best of the times.
Lock-in Period? or how long should I stay invested for?
There's no lock-in period, but it is recommended to stay invested for 3-5 years for the best results.
Risk?
As can be seen in the below graph, when the fund is held for 3 years, there has been ZERO instance when the investor has lost capital.
Below is an example of a hybrid fund and the graph shows the returns generated if an investor would have invested on any date in the last 10 years and stayed invested for 3 years
Worst return - 5.14% p.a. (in March 2020)
Best Return - 16% p.a.
Current Return - 11.5% p.a.
How safe are they?
Hybrid funds are offered by institutions like SBI, Kotak, ICICI, L&T, Axis. The best way to invest in them is to create a portfolio of 2-3 Hybrid funds (each offered by a different institution).
Taxation
Applicable ONLY ON redemption. If redeemed after 1 year, the gain is taxed at 10%; while before that, tax applicable is 15% on gains made,
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If we can help you invest, reach us on -
Email - arpita@NiveshMitr.com
Whatsapp - +91-91110-06340
Schedule a call with us - https://calendly.com/nivesh-mitr/niveshmitr
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. The past performance of the mutual funds is not necessarily indicative of the future performance of the schemes
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