Which category of debt funds can suitably replace bank fixed deposits?
- Narsimha
Normally one will be tempted to talk about the kind of debt funds other than the sophisticated ones. But I would like you to keep it very simple. Don't move beyond short-term debt funds. If your fixed deposit was going to be of a very short-term nature, say six months, consider liquid funds. If it was up to one year or one and half year deposit, consider ultra short-term debt funds. If the deposit was going to be for three or five years, stop at short-term debt funds. Don't venture anywhere else because of the ups and downs of the market. When interest rates go up, bond prices go down and you will actually witness a loss. Navigating through debt funds in a manner that you don't face an interim loss is important. So, stop at short-term debt funds.