Investing: Rishi Nathany

One keeps hearing about interest rates peaking. I want to lock my to make the most of the high rates. I am looking at a two-three year investment horizon. Should I choose fixed-maturity plans or gilt funds? Which works better and why? Is there a third option?
It is impossible to predict whether we are at the interest rate cycle peak. That said, we are definitely at high levels and, hence, nearing peak rates. Therefore, you could look at locking in funds in debt instruments at the current levels. Given your investment horizon, you could choose from a host of fixed income instruments such as bank fixed deposits (FDs), FMPs offered by mutual fund houses, medium-term debt funds, medium-term gilt funds, listed bonds and so on. While bank and FMPs should give you stable returns, debt funds and listed bonds could result in capital losses in case rates harden. These, however, could give capital gains in case rates come down.

What are interest rate futures? Should retail investors seek exposure to these?
Interest rate futures allow market participants to hedge their exposure to bond holdings from fluctuations in rates. It also allows them to take a position in the market in anticipation of the rates going up or down. The interest rate futures market has not taken off in India. These are sophisticated products and require a certain level of expertise to trade in and are not suitable for a retail investor.

I am planning to invest Rs 80,000 for part-financing my son's college education expenses. My mutual fund broker suggested a fixed maturity plan (FMP) with a three-year horizon. The product would invest up to 80 per cent in debt instruments and the rest in equity. This sounds similar to monthly income plans (MIPs) or even debt-oriented balanced funds. How is this product different? What are its possible advantages over the existing funds?
Structurally, this product is not much different from or other such products. One difference is that it comes with a three-year lock-in. The reason being the fund manager will have more time and flexibility in making longer-term investments. On the flip side, though, you would not get easy liquidity in such schemes.

The writer is director, Touchstone Wealth. The views expressed are his own. Send your queries to yourmoney@bsmail.in  

image
Business Standard
177 22
Business Standard

Investing: Rishi Nathany

Business Standard  |  Mumbai 



One keeps hearing about interest rates peaking. I want to lock my to make the most of the high rates. I am looking at a two-three year investment horizon. Should I choose fixed-maturity plans or gilt funds? Which works better and why? Is there a third option?
It is impossible to predict whether we are at the interest rate cycle peak. That said, we are definitely at high levels and, hence, nearing peak rates. Therefore, you could look at locking in funds in debt instruments at the current levels. Given your investment horizon, you could choose from a host of fixed income instruments such as bank fixed deposits (FDs), FMPs offered by mutual fund houses, medium-term debt funds, medium-term gilt funds, listed bonds and so on. While bank and FMPs should give you stable returns, debt funds and listed bonds could result in capital losses in case rates harden. These, however, could give capital gains in case rates come down.

What are interest rate futures? Should retail investors seek exposure to these?
Interest rate futures allow market participants to hedge their exposure to bond holdings from fluctuations in rates. It also allows them to take a position in the market in anticipation of the rates going up or down. The interest rate futures market has not taken off in India. These are sophisticated products and require a certain level of expertise to trade in and are not suitable for a retail investor.

I am planning to invest Rs 80,000 for part-financing my son's college education expenses. My mutual fund broker suggested a fixed maturity plan (FMP) with a three-year horizon. The product would invest up to 80 per cent in debt instruments and the rest in equity. This sounds similar to monthly income plans (MIPs) or even debt-oriented balanced funds. How is this product different? What are its possible advantages over the existing funds?
Structurally, this product is not much different from or other such products. One difference is that it comes with a three-year lock-in. The reason being the fund manager will have more time and flexibility in making longer-term investments. On the flip side, though, you would not get easy liquidity in such schemes.

The writer is director, Touchstone Wealth. The views expressed are his own. Send your queries to yourmoney@bsmail.in  

RECOMMENDED FOR YOU

Investing: Rishi Nathany

One keeps hearing about interest rates peaking. I want to lock my surplus funds in debt to make the most of the high rates. I am looking at a two-three year investment horizon.

One keeps hearing about interest rates peaking. I want to lock my to make the most of the high rates. I am looking at a two-three year investment horizon. Should I choose fixed-maturity plans or gilt funds? Which works better and why? Is there a third option?
It is impossible to predict whether we are at the interest rate cycle peak. That said, we are definitely at high levels and, hence, nearing peak rates. Therefore, you could look at locking in funds in debt instruments at the current levels. Given your investment horizon, you could choose from a host of fixed income instruments such as bank fixed deposits (FDs), FMPs offered by mutual fund houses, medium-term debt funds, medium-term gilt funds, listed bonds and so on. While bank and FMPs should give you stable returns, debt funds and listed bonds could result in capital losses in case rates harden. These, however, could give capital gains in case rates come down.

What are interest rate futures? Should retail investors seek exposure to these?
Interest rate futures allow market participants to hedge their exposure to bond holdings from fluctuations in rates. It also allows them to take a position in the market in anticipation of the rates going up or down. The interest rate futures market has not taken off in India. These are sophisticated products and require a certain level of expertise to trade in and are not suitable for a retail investor.

I am planning to invest Rs 80,000 for part-financing my son's college education expenses. My mutual fund broker suggested a fixed maturity plan (FMP) with a three-year horizon. The product would invest up to 80 per cent in debt instruments and the rest in equity. This sounds similar to monthly income plans (MIPs) or even debt-oriented balanced funds. How is this product different? What are its possible advantages over the existing funds?
Structurally, this product is not much different from or other such products. One difference is that it comes with a three-year lock-in. The reason being the fund manager will have more time and flexibility in making longer-term investments. On the flip side, though, you would not get easy liquidity in such schemes.

The writer is director, Touchstone Wealth. The views expressed are his own. Send your queries to yourmoney@bsmail.in  

image
Business Standard
177 22
Widgets Magazine

More News

Widgets Magazine
Widgets Magazine

Upgrade To Premium Services

Welcome User

Business Standard is happy to inform you of the launch of "Business Standard Premium Services"

As a premium subscriber you get an across device unfettered access to a range of services which include:

  • Access Exclusive content - articles, features & opinion pieces
  • Weekly Industry/Genre specific newsletters - Choose multiple industries/genres
  • Access to 17 plus years of content archives
  • Set Stock price alerts for your portfolio and watch list and get them delivered to your e-mail box
  • End of day news alerts on 5 companies (via email)
  • NEW: Get seamless access to WSJ.com at a great price. No additional sign-up required.
 

Premium Services

In Partnership with

 

Dear Guest,

 

Welcome to the premium services of Business Standard brought to you courtesy FIS.
Kindly visit the Manage my subscription page to discover the benefits of this programme.

Enjoy Reading!
Team Business Standard