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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.


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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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