Hyderabad: Many investors show interest in investing in equity schemes. But, their list of investments should always be varied. That is why experts suggest that debt schemes should also be included in their investment list as debt is one of the most prominent markets that investors can place their funds to multiply their wealth.
For those commencing their investment journey, debt funds are a crucial segment that should be a part of their portfolio. But, before delving into the details of what to know before choosing a debt fund, one needs to understand what a debt fund is and how it works.
For Emergency Fund...
It is always advisable to have enough cash on hand for at least six months' expenses as you do not know when any need will arise. It should be possible to take this amount whenever needed. This money is not to earn revenue. Therefore, it is not advisable to invest in equities that have high volatility. If you do so... if the indices fall there will be losses when selling shares. Hence, liquid funds such as overnight funds can be used to save emergency funds. Both fall into the category of open-ended debt funds. Of these, good plans should be selected and invested. If you want money, it will be credited to the account the day after the sale. Notably, emergency funds can also be deposited in bank deposits.
EPF and PPF
EPF and PPF can also be considered as debt schemes. However, these are long-term investment schemes. If you want to take the money in advance that will be permitted under certain conditions. Having a government guarantee is a good factor here. Those who do not need much money should make sure these plans are on their investment list.
Recurring Deposit
A systematic Investment Plan (SIP) is the best way to get the average benefit from market fluctuations. This can also be done in debt schemes. Like Recurring Deposits with a long-term goal, it is possible to invest in these on a monthly basis. It is sufficient to adjust the inflation and pay 20 per cent tax on the returns on investments over three years. Interest on the same Recurring Deposits is taxable according to the applicable slabs.
An alternative to FDs?
Debt funds cannot guarantee interest. Financial experts suggest that debt funds are not the same as fixed deposits. Do not forget that this can sometimes lead to loss. In market-based schemes, whether they are equity or debt schemes, there is bound to be some loss.
