InvestorQ : What are some of the best-fixed interest investments under this low-interest environment?
sanjana Tulsiani made post

What are some of the best-fixed interest investments under this low-interest environment?

Answer
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Nikita Damle answered.
1 month ago


Since the outbreak of coronavirus pandemic, there has been a dramatic decrease in the interest rates under various investment options. Generally, fixed interest investment includes bank fixed deposits, bonds, or mutual fund debt schemes. Let’s see these options in detail:

Bank Fixed Deposit: Interest rates on several bank Fixed deposits have gone even below 6% per annum. Also, we cannot ignore the taxability on interest received from the bank which will make it settle at 4.12% for a higher tax bracket (30%). Unfortunately, some banks are offering much lower interest in 5-year FD options, which will settle at about 3.78% p.a. after taxation. 

Debt Funds and Bonds: Interest rates on these funds are attractive as compared to fixed deposits with bank but the risk is vast as compared to any other time. The risk is that interest rates are growing up which will push down the NAVs of debt schemes as markets devalue the price of bonds to adjust to the new, higher interest rates.

Now, since our generally recommended options carry a higher risk, should you go for fixed deposits with banks that are providing lower interest rates? Well, there’s one more option in these times of crisis that is providing better returns than other options and contains less risk.

National Pension Scheme: This option delivers 6.80% per annum which is payable at maturity after 5 years. Investors also get tax benefits under section 80C of the Income-tax Act if they invest in NPS. Also, the investment is backed by the government which means it is almost risk-free.

So, during this time NPS can be a great investment option as it mitigates the risk prevailing in the market and even provides better returns and tax benefits.