The amount of commotion that has happened in the debt market is not funny. Yes not too much has happened in the market – it is the regulator who is doing most of the things.

Let us accept the following:

Posco, Warren Buffett, Ikea, many FIIs leaving India is surely not good news. However we are assuming that the country will grow – at 4%, 5%, 7% – do not get into the numbers.

UPA or BJP – frankly it will make no difference, but keeping the government out of your business is not easy. However as long as you do not go out of the way to invite them, like hotel Aditi did, is not sensible!

The government cannot (will not) reduce its expenses, but will put pressure on the RBI to reduce interest rates. Now RBI does not really have the guts to say NO, but it will crib, tweak, etc. and INCREASE interest rates in the short term, but decrease it when things get stabilized. However when will RBI reduce interest rates is a nice question to ask, but NOBODY can (will) answer such a stupid question. It should not have been asked, that is all.

Forget all the media noise about interest rates. Given the fact that we are looking at debt, it means we are looking at short term (in the long term debt is risky because it will give negative REAL returns).

So let us assume you have the following needs:

money required in 3 months:   if you know exactly the date of payment, keep money in a FD.

if you do not know the exact date, a liquid fund is still fine.

money required in less than a year: some very short term funds which may have a 3 month lock in, but not more

for more than a year: Income plans, dynamic plans,

surely more than a year, as a part of your asset allocation beyond PPF etc. : you can keep in Income plans, dynamic plans, gilt plans, even monthly income plans (MIP with about 80% at least in debt),

Very long term: say you wish to build a corpus where you love to postpone paying tax – thus getting the benefit of long term compounding – MIP, Income fund, Gilt fund – do a SIP…..

If volatility worries you, spend all your money. What is not there will not trouble you.

Buy an annuity and pray that in 40 years from now LIC will still be paying out its policies…:-)



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  1. Subra,
    No need to go till 40 yrs,LIC is withdrawing all of its current policies from Oct1st 2013, as per IRDA their returns are high it seems

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