What Are the Best Investment Options for Fixed Income Source?
                     Investment Options For Fixed Income Source
Description
Fixed Income refers to the generation of a fixed stream of income basis the investment that is made 
by a person keeping in mind their investment objective. While equities are lucrative for growth capital, 
fixed income is considered to be steadier. Depending on investment purpose, there are various 
fixed income tools which are available in India.
Government-backed savings schemes:  Government schemes offer lucrative interest rates in an 
extremely low-interest rate scenario.  These schemes include the Senior Citizens Saving Scheme 
(SCSS), Post office monthly income scheme (POMIS) & Pradhan Mantri Vaya Vandana Yojana 
Scheme ( PMVVY ). PPF is also a lucrative option as it helps in tax savings as well. 
These schemes offer interest rates from 6.6 % to 7.4%. Another added advantage of these schemes 
is the tenure of payouts being monthly /quarterly or on maturity. However, one must keep in mind 
that interest earned on some of these securities is taxable in nature, but offer higher interest rates 
as compared to Bank FD or savings account.
Debt Mutual Funds: Debt mutual funds are mutual funds that invest in fixed income-generating 
securities such as treasury bills, commercial papers, and corporate bonds. These come with a 
pre-decided investment maturity amount. Although these mutual funds yield slightly higher returns 
depending on the investment grade, they are subject to certain risks such as default risk and 
liquidity risk. One must also read into the pedigree of the fund manager. Off late, we have 
witnessed certain accidents happening in the debt mutual fund space.
PSU Bonds:  PSU bonds are debt instruments issued by Public sector enterprises. These bonds 
typically tend to offer bond yields on the higher end of the interest rate spectrum. These 
bonds tend to have a higher maturity period. Some of these bonds are also traded on the 
recognized stock exchanges. Although liquidity of these bonds could be an issue. Also, these 
bonds are available over the counter from some brokers who deal in such bonds. While they offer 
high bond yields, this could also be on account of the poor financial health of the company as a 
result of which they find it difficult to raise money from the market at prevailing rates.
Corporate Bonds and FD: Corporate Bonds and FD’s are a mechanism where an investor is 
lending their money to a company (not a bank). These companies offer a few percentage 
points of interest higher than the typical bank FD’s. However, the risk involved with these 
instruments is higher. One must also not solely rely on the credit rating of the issue before 
subscribing to such bonds & it is important to consider other factors as well. 
The above cover the general investment options when it comes to investment in fixed income 
instruments. Interest rates and taxation are vital factors which one must consider before 
investing as inflation-beating or matching is very important. If an investment is unable to 
do so, it is practically causing one’s capital to depreciate over a period of time. The 
portfolio mix is important for the growth and preservation of capital; hence, debt instruments are 
critical to construct a stable portfolio mix.
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