APARNA RAJ, A 35-YEAR-OLD IT professional living in Noida, prefers a straightforward approach when it comes to investments. She has a strong preference for the stability and security of fixed deposits (FDs) over risky options like equity or other exotic asset classes. This simple strategy has rewarded her well so far, especially considering the rising interest rates in recent years. With the interest rate cycle projected to start declining, Raj is contemplating whether it’s wise to continue with FDs. She can foresee the reinvestment risk when her FDs mature, and she might have to settle for lower FD rates upon renewal. What will be her next move?
“I have started exploring other options, such as debt funds, to have some exposure to government, state, and corporate bonds to maximise returns from my fixed income portfolio. I invest in FDs because of their simplicity, but the strategy might not give good returns in the future. I need to be vigilant about the changing trend,” says Raj.
Not just Raj; there are many others who share her fondness for FDs. Data shows FDs are nearly nine times larger than debt mutual funds (MFs). According to CareEdge Ratings, as of September 30, 2023, the assets under management (AUM) of open-ended debt MFs amounted
