For individuals looking to minimize risks and yet diversify their portfolio there is no better investment than fixed income securities. Despite restrictions on the level of risks which can be taken in India there are several opportunities for a conservative investor to make a desirable rate of income. Starting with Floating Rate Loan Funds to RBI Floating Rate Bonds, Corporative Fixed Deposits and SGB Gold Bonds, each investment tool has its own advantage.

What are Floating Rate Loan Funds?

Floating Rate Loan Funds are mutual budget where funding is made in debt securities, interest on which fluctuates with time. These adjust from time to time, this assists the fund to afford inflation together with fluctuating interests rates on the market. Since the returns are pegged to the benchmark interest rate, these funds are created to act as a hedge against rising rates and thus begins to look attractive when rates are on the rise.

Floating Rate Loan Funds investing is most suitable for those who want to receive capital with constant rates and with a minor fluctuation on the rates of interest. These funds mostly invest in loans, bonds and other securities carrying fluctuating rates of return in relation to changes in interest rates. These funds are perfect should you desire to invest in a relatively low risk investment with a steady income and Floating Rate Loan Funds offer this to us.

Understanding RBI Floating Rate Bonds

Another fairly conservative investment product is RBI Floating Rate Bonds. These bonds are floated by the Reserve Bank of India and the bonds are preferred by those investors who prefer less risks for higher inflation adjusted returns. RBI Floating Rate Bonds were offered at a fixed interest rate that has a floating nature and its rates are generally changed every half-year.

These are safe securities as they are fully guaranteed by the Indian government. For those who seeking comparatively safe investment guarantee with inflation adjusted returns, RBI Floating Rate Bonds can be a good choice. As compared to fixed rate bonds, the income that comes with these bonds may rise when they are issued during periods of economic growth.

Portfolio Planning with Reference to the Role of Corporate FDs

While Companies give out FDs as financial instruments rather than banks, their interest rates usually are higher than on bank FDs. Such deposits are usually ranked as relatively risk-free, particularly in case with high credit standing of the firm. The interest rates applicable to Corporate Fixed Deposits are set for a particular period and are perfect for the people who want fixed profits.

However, the Corporate FDs involve certain amount of risk than the risk free instruments such as RBI Floating Rate Bonds. But these interest rates are generally higher to those offered by normal bank FDs investors should however consider some factors about the finacial health of the company into these deposits. A Corporate FD can be a very useful tool for those individuals striving for higher returns on investment or those willing to take slightly increased risk.