Debt Fund

When a substantial portion of your saving are managed under one portfolio, it is critical to ensure you have a portion in a very safe asset class that gives close to after tax-Fixed Deposit like returns. Also when markets gets expensive its prudent to reduce exposure to equity and move money into a safer asset class. This maybe for a short time because when the markets move lower, you will want to buy more equity. This is achieved through a debt fund. Debt funds primarily invest in mix of debt or fixed income securities e.g. Treasury Bills, Government Securities, Corporate Bonds, Money Market instruments & other securities of different time horizons.

But which debt fund is suitable for our purpose. The primary objective of the investment in the debt fund is to reduce portfolio risk and provide high liquidity. We are taking the risk on the equity side to earn higher returns and a very low risk debt fund helps reduce the overall risk. Omega does this by investing in a Liquid Fund-the very low risk debt fund, since it invests in very short term assets. Other debt funds have securities with longer maturities and so are more exposed to default risk, interest rate changes and market movement.

We are also able to buy stocks immediately after selling the Liquid Fund, thus assuring us of prices. Finally it gives a return of around 5%post tax -it is a dividend plan and is not taxable in your hands