Ask Value Research

Choosing Debt Investments

Invest in an FMP for a defined timeframe. Choose bond funds if you want your money to be liquid…

I have a fixed deposit that will mature in the next month. I don’t need the money and want to invest in a more tax efficient manner. In the current scenario, should I go for an FMP or a debt fund like SBI Dynamic Bond? -Barun Basak

An FMP or a debt fund will make sense for anyone in the higher tax brackets. However, if you don’t come in any tax bracket, a fixed deposit is a good option because your earnings will be tax-free. If you pay tax and have a defined timeframe, invest in an FMP. But if you want your money to be on call, go for the dynamic bond fund. We are hopeful of a rate cut in the next year or so, and dynamic bond funds are key beneficiaries of them.

This article was originally published on October 22, 2012.

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