Posted on 2/1/2019 6:30:00 PM

Key Takeaways
- Debt schemes add diversification to your investment portfolio
They are good for short-term financial goals, etc.

Over years people have constantly battled two major demons – rising prices and not-so-fast rising incomes. While equity schemes seem to have caught the fancy of many investors for the possible potential of capital appreciation offered by them, debt schemes seem to be the choice for risk averse investors. Here are five reasons to invest in Debt Schemes:

  1. Many options to suit your financial goals
    Debt schemes can be classified as liquid funds, short-term and ultra-short-term funds, income funds, gilt funds, fixed maturity plans (FMPs), dynamic bond funds, etc. These schemes have different durations, investment objectives and composition of portfolio. You can choose one that suits your financial goals.
  2. Diversification of your portfolio
    Regardless of your age and risk preference, a healthy portfolio is usually one with an optimum mix of asset classes. It helps you combat the volatility inherent to various asset classes.
  3. Recommended for short term goals
    Investing in equity schemes is generally a long term investment. Short term investments need reasonable returns and liquidity which debt schemes aim to provide. The returns offered are usually commensurate with the tenure of investment and the time horizon can be matched with the scheme offering investment for the specific time frame.
  4. Launch pad for SIPs in equity
    Many investors choose the SIP route of investing in equity schemes. This can help them benefit from rupee cost averaging. By investing in debt schemes and starting a Systematic Transfer Plan to equity schemes, can help you to get the best of both the worlds – debt and equity funds.
  5. Systematic Withdrawal Plan for regular cash-flow
    For investors looking at regular cash-flow, an SWP from a debt scheme is a boon to say the least. This ensures that you receive regular cash flow either by withdrawing the appreciated amount or a fixed sum on a regular basis.

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