It is not what returns the product offers initially, but what returns you get benefited from at maturity. Current high interest may not prevail all times, i.e. the interest rates might come down by the time your product matures? There will be no meaning left for your investment if you need to avail a personal loan or car loan to fulfill your financial goals. Apart from the FMPs there are other avenues where your funds can be invested and enjoy higher returns for a little longer period of time.
There are certain advantages of investing in a debt fund as it provides the following benefits:
- As an investor, if you have invested in a short-term debt fund, your portfolio yield goes up even if the interest rates go down.
- When the interest rates do not change, short term debt funds do fairly better than FMPs.
- By the time your plan matures, if the interest rates go up, you are likely to be benefited from the increase only if you remain invested for another very short duration. This brings you at par with Fixed Mutual Plan holders.
As an investor you are always in a position of taking full advantage of the market situations, since these debt funds are positioned in a way that they can give you the maximum benefit from the current interest rates. Take advantage of this market rise and continue investing as a 90 day interest benefit can increase the interest rate up to another 20-30 days amount, if you can stay put at the time of maturity.