Bank FD (Fixed Deposit) interest rates over the past few years are falling down. NPAs (Non-performing Assets) have raised questions marks on ratings of banks in India. Looking at the falling interest rate scenario, it is not wise to invest in bank fixed deposit, NSC and PPF as they are prone to change in interest rate. And not only bank fixed deposits, many financial advisors are advising their clients not to invest in GILT funds.
A look at falling interest rates
When countries become
developed economies from emerging economies through rapid development, their
levels of inflation and interest rates tend to come down as shown in the table
below.
Country
|
10 Year Yield
|
||
2000
|
2018
|
Drop in Yield
|
|
US
|
6.50%
|
3%
|
-54%
|
S. Korea
|
8%
|
2.70%
|
-66%
|
Germany
|
5.50%
|
0.55%
|
-90%
|
China
|
7.50%
|
3.80%
|
-49%
|
India
|
11%
|
7.80%
|
-29%
|
A look at how wealth is eroded due to falling interest rates
Alternative to Fixed Deposit
Many HNIs (High Net Worth
Individuals) hold some portion of their wealth in fixed-income instruments. As
the fixed deposit is losing its charm, the options available to them are
becoming less and less attractive. There needs to be a viable, trustworthy investment
option where a good interest rate can be guaranteed over a long period of time.
Reliance
Nivesh Lakshya Fund is one such alternative
for investors.
Reliance Nivesh Lakshya Fund
Reliance Nivesh Lakshya Fund
is an open-ended debt scheme recently launched by Reliance Mutual Fund. The
fund aims to capture the prevailing interest rate for the long-termand shield investors against falling
interest rates. In order to achieve this, this debt fund will primarily invest
in long-term fixed income securities,
predominantly Government securities, at current yields. The NFO of the scheme
is currently open for subscription and closes on July 2, 2018. In this post,
let’s take a look at Reliance Nivesh Lakshya Fund.
Key Features of Reliance Nivesh lakshya Fund
1. An opportunity to secure prevailing
interest rates for the long term.
2. Long-terminvestment horizon up to
25-30 years.
3. No lock-in period, you can withdraw anytime.
4. Tax efficient due to indexation benefit, applicable
after three years.
5. Investment in fixed income
securities including Government Securities.
6. Regular cash flows via Systematic Withdrawal Plan
(SWP).
Long-TermFinancial Goals in India
Some common long-termfinancial
goals among Indian investors are:
1. Tension-free
retired life
2. Good education for children
3. Marriage of children
4. Leaving an estate for the children and/or the
grandchildren.
5. Accumulation of a certain corpus in the long term.
A vast majority of people
have not planned for their long-term
goals, while a lot of them remain invested in suboptimal
assets.
Suitability of Reliance Nivesh Lakshya Fund
Reliance Nivesh Lakshya Fund
is suitable for the following investors.
1. HNIs (High net worth individuals)
This debt fund is best
suitable for HNIs who want to preserve their wealth by locking in a good
interest rate for 25-30 yearsthrough government securities.
2. Parents and Grandparents
This fund is also suitable for parents and grandparents who want to
create a legacy for their children /
grandchildren by locking in good interest rates for 25-30 years horizon.
3. Retirees
This fund is also suitable
for retirees who want to secure a good interest rate for their long-term income
generation needs as the fund allows regular cash flows via SWP.
Why you invest in Reliance Nivesh Lakshya Fund?
1. To secure the currently
prevailing interest rates for long term.
2. Insulation from credit
risk.
3. Tax efficient due to
indexation benefit, applicable after 3 years.
4. Opportunity to invest for
long-term with the flexibility to
withdraw anytime.
5. Regular cash flows
through Systematic Withdrawal Plan.
Reliance Nivesh Lakshya Fund is a good scheme for investors who want to preserve their wealth by locking in a good interest rate for 25-30 years through government securities.
Also read: How to start a SIP?
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