People end up asking me some very basic debt market questions too…so here is an attempt to help them…if they do not know the basics

Continuing the debt class, have you ever wondered what assets can you invest in to meet your debt requirement? Well there are many – and most of them you know about. Let us just enumerate them. We will see them in detail in a later class. The list is as follows:

a. Savings Bank account   b. Bank Fixed deposits

c. Postal schemes / small savings as they call it includes Kisan Vikas Patra (KVP), Post Office Monthly Income Scheme (POMIS), National Savings Certificates (NSC), Post Office Time Deposit (POTD).

d. PPF (Public Provident fund)

e. Own Provident fund (Employee Provident fund) – not a rupee from here goes into the equity market

f. Endowment Plans from Life insurance companies (strictly speaking they do invest in a small amount of equities, but LIC’s return over the past 2-3 decades looks like there was almost no equities!

g. Mutual fund schemes – investing in debt only – like Liquid funds, Most of the fmps, floater funds, Income funds, Gilt funds.

h. The debt portion of balanced funds – the Hdfc prudence fund for example has invested – 25% of its corpus in debt.

if you are a tax payer stick to a debt market instrument like Income fund in the growth option….withdraw after ONE year…minimum and pay much lesser tax.

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