Debt products – the full range

What are the debt instruments that you can invest in?

As an Indian you have a lot of choice as far as debt is concerned. You should look for the following when you are looking for a debt instrument:

1. Who is the issuer: the Government, Municipalities, Public sector companies, Private sector companies, – including banks.

2. Rating: the best rating is AAA, and the worst for YOU should be BB+. Govt securities are not rated.

3. Tenor: is it a long term bond or a Short term bond – from 12 months to 30 years (not talking about T bills which have a 90 day duration! )

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.

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) and NPS (debt option)

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.

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