I am 34 years old. I am a teacher by profession. I put my surplus money in bank FDs. Recently, the banks have cut interest rates for one year FDs to around 5%. As far as I understand, this much return will not even beat inflation. I looked at the returns of liquid funds which were also not great. Please suggest which is the best investment option to invest my money for around 1 to 2 years? I fall in the 10% tax bracket.
By Prashant Maurya, Partner, Citrine Financial Advisors
As we are in a soft interest rate regime environment so interest from Fixed Deposits and similar instruments have gone down in the last one year.You can opt for Low Duration, Short Term and Banking PSU mutual funds. Returns will be at par or slightly higher than Bank Fixed Deposit. If there is some more softening of interest rates then you may have mark to market gain along with accrual in the portfolio of these funds which may deliver the returns higher than prevailing Bank Deposits. But you should keep your expectations under check. These funds may not necessarily mirror the returns that they have delivered ijn the last one year. Last one year has seen major interest rate cuts which lead to higher mark to market gains in these funds which in turn generated high returns. Also, while choosing a fund, ensure that the portfolio is of highest quality e.g AAA , G Sec , Bank CD ,etc.
(Views as expressed by the expert.)