The government has seen it fit to keep interest rates on small savings schemes such as NSC and PPF steady despite them being pegged to g-sec yields that have fallen in the last two years. But benchmark yields have been rising now.
Don’t touch your existing debt funds, say financial planners. But if you want to invest incremental money, deploy slowly
In the current inflationary scenario, locking in rates for long term is not a wise scenario and the short term rates are not at all remunerative.
Market-level fluctuations are part and parcel of any market, be it equity or debt or commodities. Price levels work in cycles and if you stay the course, you will reap your returns.
Since FMPs come with a specific timeframe, are close-ended, and of a specific credit quality, investors must first ensure the profile of the new schemes suit their investment objectives.
The EPFO has announced lowest interest rate in over 40 years, causing heartburn among EPFO’s 60 million members, or salaried employees. However, EPF as well as its extension VPF continue to be indispensable as retirement planning tools.
Generating alpha will become more and more challenging
If you have been following the bond market, then you would have noticed that the bond yields are rising across the world. But do not wait for higher rates on small saving schemes.
Investors in fixed maturity plans typically look for relatively less volatile returns than those offered by open-ended bond funds
Many investors invest entire lumpsum in PPF between April 1-4 because of the way interest is calculated. But a closer look at this strategy reveals it does not make much difference.
By reversing the rate cut in small savings, investors have got a relief. That doesn’t mean you should rush for them rightaway. Allocate your investments across asset classes and use small saving schemes, smartly, especially NSC and Postal Time deposits.
One of the ingredients of equity valuation is the cost of capital which is directly linked to government bond yields. So if the bond yields rise, the implied cost of capital increases.
After lukewarm response to its earlier scheme to allow small investors to invest in government securities through stock exchanges, the RBI now allows direct investments.
The ingredients are just the right mix for investors to stay invested across fixed income strategies – as “carry” assumes significance over “capital gains”.
You have to align your investment plans with your financial goals.
The interest rate on small savings schemes are not reduced as frequently as they are supposed to be
An investor has to be patient and undertake the necessary research before zeroing in on the schemes to invest – either lumpsum or via SIP.
We are still in the early days of ESG investing in India. But interest in the space has definitely been increasing and mutual fund companies have realized that.
Increased volatility of returns or slightly lower returns should not make you take increased risk, in search of higher returns.
The interest payable on January 1 and July 1 will be linked to the then prevailing rate of interest on National Saving Certificate (NSC).
Large-scale bond buying by central banks will lead to global bond yields trading at lower levels
Maximising returns may no longer be the guiding principle, with the focus more on protecting capital with reasonable returns whether in equity or debt markets, say experts
Ashwani Bhatia of SBI Mutual Fund feels it is a message largely to investors, mainly HNIs and institutions that this part of financial market is safe and RBI is looking at financial markets very carefully.