Invest in debt mutual funds to protect yourself from falling interest rates

loss-thinkstockInterest rates are clearly on the way down. The State Bank of India has lowered the interest rate on savings bank accounts to 3.5%. Fixed deposit rates are still around 6.25% for most people but are surely headed lower.

This is a reduction of about 25% of what investors were earning on their fixed deposits just a couple of years back. Don’t be surprised if, in about a year or so, most banks are paying 3.5% on savings accounts and 5-5.5% on fixed deposits.

Since individuals park a big chunk of their money in these two types of savings, the fall in interest rates is a problem. Is there a solution? As it happens, there is. There are mutual fund products that fit the bill perfectly.

They not only give you higher returns than these banking products but also get taxed at a lower rate, making the effective return very attractive. The convenience is still not up to the level of a savings account, although it’s pretty close.

Read More

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s