Can debt funds and RBI bonds deliver inflation-beating returns?

I want to know whether short-duration debt funds and RBI floating rate bonds are effective in beating inflation - Jitendra

While short-duration debt funds and RBI floating-rate bonds deliver decent returns, they can only marginally beat inflation. Thus, if you aim to invest in these securities with the aim of earning high returns, think again.

The objective of investing in fixed-income securities such as debt funds and bonds is to offer a) capital preservation and b) stability to your portfolio, as they deliver predictable returns.

On the other hand, aspiring to earn greater returns through a fixed-income option would mean investing in riskier options and that's not something recommended by us. It would defeat the purpose of having a fixed-income allocation in your portfolio.

If you are keen on investing in securities that beat inflation by wide margins, consider adding equity investments to your portfolio.

Also read: Debt is riskier than equity

This article was originally published on April 16, 2024.