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Mutual fund category with same safety as FD

Date: 29 Jan 2016   Posted By: sshubh     Group: Finance and Investments    Category: Mutual Funds   

I am trying to find out mutual fund categories which have safety level same and returns higher than bank FD.
Can you please answer following specific things on liquid fund:
1. Returns Difference: For a person in 30% tax bracket, how much more or less % post-tax returns (e.g. +/- 1%) can be expected as compared to an FD of, say a govt bank like SBI.
2. Safety: Even a govt bank carries certain risk (e.g. bank going default or bankrupt) of losing principal amount. If we consider the safety in a govt bank FD to be 99%, what would be the safety level in fund? If possible, please mention the potential scenarios also that contribute to increased risk in fund.

Experts: It would be great if you can answer the above questions for arbitrage fund, ultra short term debt and short term debt funds as well.

Searching for information about comparison of mutual fund versus fixed deposit? Find responses from experts on this page.

Author: Partha Kansabanik    09 Apr 2016      Member Level: Diamond     Points : 2  (Rs 2)    Voting Score: 0

Liquid mutual funds and ultra-short debt mutual funds have almost equal safety level with bank fixed deposits. The CAGR of liquid fund in India is 7.88% and ultra-short debt mutual fund is 8.34%. For a person in 30% income tax bracket, ultra-short debt mutual funds are definitely more advantageous from taxation point of view, because if the investment is for more than 3 years, the investor would get indexation benefit.

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