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Investing in today’s scenario is the most confusing and difficult thing. The traditional methods of saving are Fixed Deposits (FDs) and Recurring Deposits (RDs). FDs of commercial banks are known to be the safest options for investment. However, there is a gradual reduction of interest rates in such instruments in recent years.
Hence, people are diverting to other alternative options. There is a significant segment of investors who prefer safe and carry low-risk instruments. The investment returns dependant senior citizens choose such types of investments. They need assured returns by making a short-term investment.
One such alternative of investment is debt funds that provide relatively higher returns than fixed deposits. The return on debt fund generally depends on the investment tenure of the fund. However, the average return on short-term debt funds is 7-9 per cent, which is higher than the return of 5-7 per cent on fixed deposits for the same term. In addition to higher returns, the debt funds also carry dividend options and are highly liquid.
Compared to traditional funds, the debt funds are volatile. Hence, there is always some risk associated with it. An investor of a risk-averse category can mitigate such risk by diversifying his portfolio to risky and risk-free investments.
Investors can follow the tips below for investment in debt funds to avoid any false step:
Hence, follow above tips to avoid any major the debt traps.