Managing Fixed Income well won't make you rich, but it can make the ride smoother.
Equity is the engine: it delivers the power and grows your money. Fixed income is like the transmission and the suspension: the parts that make the driving easier, and the ride smoother and enjoyable.
When you need money, you need the money
University fees. A wedding. A home down-payment. Your living expenses in retirement. Each one has a date, and on that date you need the full amount, not most of it.
Equity doesn't check your calendar before it falls, and it doesn't always correct fast enough either.
In past Nifty 50 falls, simply getting back to where you started has taken about 2 to 3 years. A goal due sooner than that can't afford to wait.
Illustrative shape. Recovery range from our research on Nifty 50 history. Past performance is not a guide to the future.Let equity grow. Keep the ride bearable.
Growth is equity's job, and the swings come with it. Fixed income's job is to keep the whole portfolio's ride inside a range you can live with, so equity's worst days never rattle you into a decision you'll regret.
The real danger in a crash isn't the fall, it's selling into it. A ride you can live with is what stops you making that one costly move. Steady nerves keep your money invested, and invested money is what compounds.
Fixed income plays an important role in your portfolio
Four different jobs, each essential in its own way. Here is why every one of them matters, and how it is sized.
A market fall on the wrong day can force you to sell your goal money at a loss.
The exact sum for a dated goal, held apart from the market, ready in full when the day comes.
Living expenses need to be available in-full without fail and not market dependent.
A pay cheque you set up yourself, funded by money already put aside, not the market's mood.
equity money waiting to be invested.
An emergency, or a sudden opportunity, shouldn't force you to sell equity at the worst possible time.
An emergency fund of 6 to 12 months' expenses, plus 5 to 20% of your equity portfolio held as dry powder.
Without it, your whole portfolio falls with the market, with nothing to steady it.
A holding that doesn't move with your equity, keeping the ride inside a range you can live with.
Taken profits off the table with nowhere to put them yet? You park it in fixed income assets until the right equity opportunity presents itself.
We start with your requirements, not a percentage
We don't pick a number like "20% in fixed income" and then hunt for a home for it. We start from what you need and when, size it from there, and put every rupee in the layer that matches its date.
Money you won't need for longer than that? Invest it in equity and let it grow.
Before anything is invested, we look at four things:
How easily you could get the money out if your plans change
Whether the price already reflects the news
How sure we are of getting the money back
What you actually keep after tax, compared to simpler options like a fixed deposit.
Why we don't chase a higher return here
The extra return on offer is never free. It is payment for taking more risk somewhere: a shakier borrower, a longer wait, or holdings that are harder to sell in a hurry. For money you'll need soon, that trade isn't worth it, so we don't make it. If a fixed income option pays noticeably more, someone is taking a higher risk to earn it.
- Interest-rate (duration) riskThe price falls when yields rise, before the holding matures.
- Credit riskThe borrower misses a payment, or is downgraded.
- Reinvestment riskMoney that matures has to be reinvested, sometimes at a lower rate.
- Liquidity riskYou can't always exit at a fair price exactly when you need to.
Common questions
Isn't this just a drag on my returns?
Judged on its own line, yes, it will usually lag. Judged at the level of the whole portfolio, it earns its place: it is the reason you can leave your equity invested through a fall instead of selling at the bottom to raise cash. That avoided sale is a real return, it just doesn't show up on the fixed income line.
How much should I keep in fixed income?
There's no magic percentage. It depends on what you need and when. Two people with the same savings can need very different amounts, because their goals and timelines are different.
Why not just use a fixed deposit?
Sometimes a fixed deposit is the right answer and we'll say so. It gives you a fixed rate and, up to Rs 5 lakh per bank, insurance if the bank fails. What it may not give you is the right timing for your goal, or a penalty-free exit if your plans change. Usually it ends up as a mix.
Are debt funds safe?
They're not guaranteed and not insured like a bank deposit. Their value can fall, and in rare cases the money can be hard to withdraw for a while. That's exactly why we check how easily you can get your money out before anything goes in.
I've booked profits and don't know where to put them yet. Where does that money go?
One of the most common reasons to hold it. Money taken off the table needs somewhere calm to sit while you look for the next opportunity, not a round trip straight back into the market you just left. We park it short and high quality, so it holds its value and you can move the day you find the right place for it.
Do you earn a commission on this?
No. We're a SEBI Registered Investment Adviser and we charge a fee only. We take no commission, referral fee or cut from any fund, bank or platform. Where a fund is used, we put you in its direct plan, which has no distribution fee.
Tell us what you're saving for. We'll tell you what it needs.
As part of Omega's whole-portfolio advice, we give fee-only guidance on your fixed income: how much you need, where to keep it, and how to line it up with your goals and their dates, so the rest of your money can keep compounding. No products pushed. No commissions.
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