18th February, 2019
Kisan Vikas Patra Related News

Stem the tide of re-investments risk with Kisan Vikas Patra and others

As banks reduce interest rates, those with investments in fixed deposits and savings accounts are facing reinvestments risk and their rate of returns are also shrinking. Here are four ways to manage the re-investments risks:

  • Long-term debt instruments: Fixed-income investors should purchase long-term debt products and lock into the current interest rates. Savings schemes such as NSC, Kisan Vikas Patra, fixed deposits or 5-year post office fixed deposits and monthly income schemes.
  • Tax-free bonds: Long-term investors should opt for tax-free bonds from the secondary market which invite no tax on interest earned. These bonds were issued by state-owned firms like PFC, NHAI, HUDCO, NTPC and NHPC in the past with tenure of 10 to 20 years.
  • Debt funds: Individuals should look at liquid and ultra short-term debt funds. Liquid funds are suitable for depositing surplus cash for short periods up to 90 days. Those having surplus funds ranging from 6 to 9 months and are willing to take marginal risks can invest in ultra-short terms funds.
  • Equity through SIPS: Fixed income investors should invest in equity through systematic investment plan (SIP) of mutual funds. SIPs allow investors to purchase units on a given date every month.