Stop Ignoring Debt investments!

In the past few years, on average, the
debt funds have outperformed most equity mutual funds. Investors who have
parked their money for the short-term in debt funds have experienced good
returns and have benefitted on the forefront of the interest rate and risk
appetite.  Keeping in mind its past
records and future prospects, the one thing that can be said is that, ignoring
debt investment may prove to be a bad idea for the investors in terms of both
risk and reward.

why debt investments shouldn’t be ignored

Contrary to popular belief, debt
investments can prove to be a high yielding option for most investors when done
the right way. The perks and features of each type of debt investment may suit
the needs and requirements of the specific type of investors, it is crucial
that they choose the most suitable type as per their needs to enjoy most
benefits from their investments. Here are a few common features of all debt
investments that highlight the advantages of debt investments and explain why
you shouldn’t ignore debt investments:

  1. Excellent returns:Debt investments tend to offer better
    returns to the investors than most other short-term schemes like bank FD,
    Savings Schemes or other deposit accounts. Factors like market situation, the rate
    of interest and liquidity of each type of debt funds help investors to earn
    better returns within a short period of time through debt investment. 
  2. Higher returns than Bank FD: The earnings
    made through debt investments schemes like Ultra-short term and liquid funds
    are much better when compared to bank saving schemes and Fixed Deposits. The
    debt funds tend to be more flexible and liquid in nature and come with a lower
    risk, which means debt investors don’t have to pay a penalty in the case of an
    early withdrawal.
  3. The scope of diversifying investment

    Debt investment offers investors with an array of short-term and long-term
    funds to choose from; such funds tend to vary in terms of their investment
    horizon, the rate of interest, returns and associated investment risks.  Such a variety of option enables the
    investors to choose according to their financial need and requirements and also
    offers an opportunity to adjust and diversify their investment portfolio as per
    the market situation.
  4. Achievement of goals: The
    characteristics and features of different debt instruments help investors reach
    their financial goal at their comfortable pace. The long-term funds help
    investors meet bigger and life-long goals like planning their retirement, purchasing
    land or other items of value. While short-term funds help them to meet
    immediate financial needs like paying outstanding loans, EMI or rent deposits.

A good combination of debt and equity can
increase the value of an investment portfolio; make sure to discuss with your
financial planner the suitability of different debt instruments and how they
can benefit your investment portfolio in terms of returns and stability. Contact
our financial planners and experts to find out in details about the future
prospects of debt investments and why you should consider them.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns. Wealth Redefine is a AMFI registered Mutual Fund distributor – ARN - 167127

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