Last Updated : Jun 09, 2018 02:01 PM IST | Source:

This week in Personal Finance: How RBI’s rate hike will impact loans; reasons to invest in debt funds

Debt funds are an important instrument of investment and as an investor one should always figure out what are the factors that make these funds relevant to invest.

Moneycontrol News @moneycontrolcom

After a gap of four years, the Reserve Bank of India’s Monetary Policy Committee (MPC) hiked policy rates by 25 basis points. RBI raised repo and reverse repo rate to 6.25% and 6%, respectively.

The move is expected to result in banks raising the interest rates on home loans and cards. However, higher policy rates could have a positive impact on fixed deposits.

Experts believe that floating home loan rates would increase as marginal cost of lending rates (MCLR) would go up for banks in the near future. For example, equated monthly installments (EMI) on a Rs 50-lakh loan for 20-year period would go up by Rs 801 if the interest rate payable moves up to 9% from 8.75%. However, banks have to wait till the next reset date on a MCLR-linked loan to raise the interest rate on each loan.

Read to know how the RBI rate hike will impact you as a borrower

In uncertain times for the capital market, investors generally look at debt for safety. They often ignore debt funds because they give lesser returns compared to equities. However, debt funds are an important instrument of investment and as an investor one should always figure out what are the factors that make these funds relevant to invest.

Here are 5 reasons why you should invest a debt fund.

An interesting option to diversify one’s portfolio today is to invest in International Funds. These funds are those that primarily invest in stocks of companies located outside India. By investing in international markets, these funds allow investors to benefit from international growth stories, thus boosting portfolio returns. It is a great way to diversify one's portfolio.

Here is why these funds can be considered for investment.

Every time you invest in a mutual fund, you must have come across the term 'benchmark'. But have you ever given a thought that what ‘mutual fund benchmark’ means, why is it associated with every scheme and how it impacts your invested amount? Well, a benchmark is a standard against which you can measure the performance of a mutual fund, security or a fund manager's skill.

Read to know all about mutual fund benchmarks and how they help you in gauging your investment performance.

The Supreme Court committee on road safety has suggested that insurers should give an option of 3 years and 5 years for Third Party Insurance for cars and two wheelers respectively. In this backdrop, IRDAI has asked insurers to file these products & offer these options to the customers.

However, the long-term policy for 3 for car & 5 years will be offered only for third party insurance and not for the comprehensive cover (which includes vehicle damages). Currently, maximum one-year comprehensive policy for car & three years comprehensive policy for two-wheelers can be offered by insurers.

Here is how the IRDA’s move will impact car and two-wheeler owners.

Staying on the subject of insurance, have you considered buying a cover for risk of cyber-crimes?  We are living in a digital world with perpetual fear that our banking details and data stored online could get stolen, hacked, damaged or erased. The biggest nightmare that an individual can wake up to is to see an unauthorised debit in their bank account and realise that they are a victim of an online fraud.

Cyber insurance provides customers with a comprehensive protection against various cyber risks. Here are some of the benefits.

The need for diversification or high growth often makes investors dabble in illiquid securities. Some want to transact in tax free bonds, fixed maturity plans (FMP), closed-ended funds (CEF) or even non-convertible debentures (NCD) listed on stock exchanges. However, this is way different from buying a stock with fair volumes on the stock exchanges.

Here are a few factors you should keep in mind while investing in such securities.
First Published on Jun 9, 2018 02:01 pm
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