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Inflation-Adjusted Gains

Income funds are likely to be volatile, but here’s how to beat that

I have Rs 1 lakh invested in fixed maturity plans (FMPs) that mature next fortnight. Please suggest some debt investments with a time horizon of 2-3 years. I am a retired person and need a safe investment, but its returns should beat inflation.
-    Pramod P. Bhave

In light of the expected rise in interest rates, volatility in income funds is going to abound (bond prices will fall when interest rates rise). We suggest that you invest 90 per cent of the money in high yielding bank fixed deposits where the principal will be secure. To get positive inflation-adjusted returns, invest the remaining 10 per cent in large-cap diversified equity funds. Birla Sun Life Frontline Equity Plan A, HDFC Top 200, DSPBR Equity are good picks.

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