Hi Basu sir, We have around 3L of accumulated corpus and wanted to invest it in best way with good returns.
Time line 4 to 5 years.
Which would be best product Liquid funds or Short term debt funds or bank FDs. Little confused among them i need good returns offcourse not as much as in equity. Can you suggest me one or 2 specific products please.
Use Liquid Runes or Ultra Short Term Debt Funds.
Hi Basu sir, i have one more question when we look at ultra short term or short term debt funds when we see this maturity period what does it exactly mean. For example if it shows they invest in bonds which mature in 90 days does it mean our money will get required interest by 90 days and we can remove it when ever we want after 90 days or 6 months what ever it is? And there will be no further no much growth after this maturity period?
There is the biggest misconception that we must align our debt fund as per our time horizon. Like if the liquid funds bond portfolio maturing in 90 days time means we must invest money if we need that money within 90 days or so. However, it is not like that. Higher the maturity period higher the interest rate risk and volatility. Hence, to reduce the risk, I always suggest to use Liquid or Ultra Short Term Debt Funds ONLY. We look for debt funds to reduce the volatility but not to play with the interest rate, credit risk or any other types of movement.
Hi Basu sir, Oops really i understand now and even i was under same misunderstanding as you referred in your initial line about 90 days. Sir then I have one question, once we invest in Liquid/ultra short debt funds with time horizon of 3 to 4 years is there any ideal time during this 3 to 4 years, where i can get the feel or understand that this fund has yielded maximum interest it and its not going to yield any more and i can take it out from now anytime from now when i want ? Do we usually get in to such situation if so how can we know it. Please help me i know debt funds yeilds are lesser than equity but better than bank FDs but not able to understand will there be a situation after 2 or 3 years where i can understand this is what max this fund cant yeild?
Liquid or Ultra Short Term Debt Funds are least volatile compared to other types of debt funds. Hence, stick to your expected return rather than timing it.
Expect around 6% to 7% returns from such funds.
Ok so once we see 6 to 7 returns anytime we can remove it based on our nead and goal reaching time without waiting much. Is my understanding correct?
Thanks a lot