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Best Alternatives of Fixed Deposits Amid High Inflation Rates

Neeraj

Neeraj

Aug 09, 2022

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best-alternatives-of-fixed-deposits-amid-high-inflation-rates

Best Alternatives of Fixed Deposits Amid High Inflation Rates

Investors having money in fixed deposits with different financial institutions should definitely worry as they are not getting the returns that they actually should get. The returns in FDs today are also the same but inflation is reducing the value of their invested money. The need is to balance the investments. The rising inflation is a big concern but instead of worrying about it, the better option is to look for a better investment option than a fixed deposit in India before it is too late.
The world has witnessed the unexpected growth in the inflation rate affecting the global economy. In India, the Reserve Bank of India is forced to increase the repo rate repeatedly at a short gap to bring down the inflation rate. The increasing inflation rate has become one of the major reasons that has given rise to the need to find the Best Alternatives of Fixed Deposits Amid High Inflation Rates in the country.

Below are the Best Alternatives of Fixed Deposits Amid High Inflation Rates

1. Fixed Maturity Plans

2. Government bonds

3. Corporate FD

4. Debt mutual funds

5. Sovereign Gold Bond (SGB)

6. Ultra-short-term funds

7. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

best-alternatives-of-fixed-deposits-amid-high-inflation-rates

Why to find alternatives to fixed deposits in 2022

Fixed deposits in India have been one of the most preferred choices for safe investment. People do not think beyond FDs because of many reasons. But with the many initiatives on investors education, the awareness has increased across the country. Today, retail investors are taking interest in other fixed income securities and thinking beyond FDs.
The rate of interest in FDs is generally low. FDs are taxable, which further reduces the earnings you earn as a net amount. If the most common question - Why to find alternative of fixed deposits in 2022 troubling you, read the content carefully. It will help you find answers to many of your questions.
The continued growing inflation rate has forced investors to find alternative of fixed deposits in 2022. There has been record growth in the inflation rate worldwide in 2022. It has resulted in many problems. The inflation-adjusted real returns with rising inflation fall further. It has also been observed that the debts fund has suffered during inflation. It is essential to maintain a balanced portfolio to make the most of your valuable investments specifically during rising inflation.

What are short-term investment options better than FD?

Short-term investment is a type of investment used by investors to temporarily park their fund that can be easily converted into cash generally within a period of five years. Every individual has both short-term and long-term goals in life. You can make your investment decision based on your financial objectives in life including short-term goals.

Quick 7 Facts of Short-term investment

1. Short-term investments are also known as temporary investments or marketable securities.

2. The term typically is within five years.

3. It can be converted in cash without much effort.

4. Short-term investments offer relatively low income.

5. They have high liquidity.

6. Some examples of short-term investment are saving accounts, recurring deposits, fixed deposits, national saving certificates, liquid funds, etc.

7. A company’s holding intended for sale within a year is also referred to as a part of Short-term investment.

The below popular short-term investment options can be a better option than FD

Certificate of Deposits (CDs)

Money market accounts

Government bonds

Treasury bills

What Things to Consider prior to Investing in a Short-Term Investment option?

If you wish to go for a safe investment option, consider the essential factors that can help you avoid disappointment. It can also accomplish your varied objectives in life.
Consider the below Things prior to Investing in a Short-Term Investment plan

Capital protection

Tax liability

Liquidity

List of popular Short-Term Investment plans for the retail investors

Recurring Deposits

Liquid Mutual Funds

Savings Account

Fixed Deposits

National Savings Certificate

Debt Mutual Funds

9 Top Short-Term Investment Choices in India

Investment Holding Period Return Rate
Corporate Deposits (CD) 1 to 3 years 6% - 12% per annum
Equity Mutual Funds 12 months to no limit 7% - 15% per annum
Recurring Deposits 6 months to 10 years 4% to 8% per annum
National Savings Certificate (NSC) 5 years 6.8% per annum
Treasury Securities 91 days to 364 days 7.5% per annum
Savings Account Nil 2% to 7% per annum
Debt Mutual Funds 36 months to no limit 6% - 9% per annum
Stocks, Commodities & Derivatives Market Less than a day to no time limit Variable
Liquid Mutual Funds 1 day to no limit 2% to 6% per annum
Note: The information shared above in the table is taken from various sources. The rate of interest and the tenure is subject to change. Check the latest information about the respective Short-Term Investment options before making investments.
best-alternatives-of-fixed-deposits-amid-high-inflation-rates

9 Top Short Term investment choices in India

Better Investment Option than Fixed Deposit in India

Finding a better investment option than fixed deposit in India can help millions of retail investors who are unable to think beyond fixed deposits. The retail investors in India choose to invest in FDs with different maturity periods. The interest rate and tenure vary. The return on FDs also depends on the tenure you choose.
The better investment option than fixed deposit in India as discussed above include Certificate of Deposits (CDs), Money market accounts, High-yield savings accounts, Government bonds, Treasury bills, and other types of bonds.

Bonds – a better investment option than fixed deposit

Bonds are debt security issued by an entity looking to raise money from investors to fulfil their various business objectives including operational expenses, projects, business expansion, and more. A bond issuer is liable to pay a fixed coupon rate as interest and the principal, also known as face value, back at the end date of maturity.
Bonds feature coupon payment, predictable income, fixed income, liquidity, capital protection and comparatively higher returns on investment. It is known to provide investors with a fixed interest for the tenure opted for maturity. There are various classifications of bonds based on their features. You can choose the bond you prefer to invest considering your long and short-term financial goals. You can invest in corporate bonds with long-term maturity if you are looking for higher returns.

1. Investment in bonds is relatively safe.

2. You get interest paid at a predetermined interval

3. Guarantee of capital protection and much more

During rising inflation, which debt fund category is recommended?

No matter whether it is a normal period or the period of rising inflation, taking wise investment decisions is always necessary. At times when you find it difficult to make right decision prefer to seek investment expert advice. It is better to seek expert advice over experiencing monetary loss. If beating the risk of interest rate is in your mind, it is better to go for medium-term and short-term debt funds in comparison to long-term debt funds because it has the associated risk of higher interest rate with them.

Why go for Portfolio Diversification during rising inflation?

Portfolio diversification is the best all-time solution. It can help maximize the returns and minimize risks involved with different assets. Investing in equities can be a promising idea during inflation period as it is known to perform well in the financial market. Also, the return in equities is high in comparison to other investment instruments. Experts recommend portfolio diversification and to follow a balanced approach if required under the guidance of investment experts. During rising inflation, it will help you maintain the purchasing power of your money.

Why Choose BondsIndia to buy bonds online

1. BondsIndia is a secure and technology-enabled online platform for trade in bonds and other fixed income securities.

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3. India’s biggest library of listed bonds.

4. Paperless KYC completely online.

5. Complete price transparency.

6. Digital reporting along with digital payment.

7. Hassle-free Portfolio tracking.

8. Realtime Online Settlement with ICCL.

9. Investor education resources.

How to Invest in Bonds at BondsIndia?

Investing in bonds at BondsIndia is easy and hassle-free.

Visit BondsIndia.com.

Create your account.

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Browse through the distinct categories and choose the bonds you wish to buy.

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You have the option to choose investing in the listed top performing or trending corporate and other bonds. You can explore online to check Corporate Bonds rendering higher coupon rates. BondsIndia.com facilitates hassle-free trading. You can register your account, get your KYC done online, and take advantage of your investment in bonds.
Investors staying in any part of India can directly buy bonds through BondsIndia.com in the top performing and trending bonds. At BondsIndia, earning client satisfaction is the key objective. We are in the continuous process of making trade in bonds simpler, secure, and free from hassle for our valued clients. Explore India’s biggest library of listed bonds available for potential trade today.
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