Today we were having the conversation about money and how the returns over the years are getting wiped out because of the West Asia Conflict. And at teh same time someone told that they have invested in FD and are enjoying the profit from FD. Now if you see the last 1 year return, Indian Stock market has given negative returns whereas the FD is around 7%.
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So yes if we consider the last 1 year data, FD has given more returns than the stock Market. But at the same time if we see the 3 year period, the stock marlet has given 10% returns whereas through the FD you will get only 7%. And that's why having the right diversification is required. After 2020 people have invested only in equity and not in the debt fund.
When I have started investing, I tried to keep 20% of my portfolio into debt and then I also moved to 90% equity and that's why I am seeing my portfolio going down everyday. And instead if I have kept the 70% equity and 30% debt then I would be well diversified and my portfolio would be sitting at the sweet spot.
This is again FOMO, since the market was going up we all thought that market will continue yo go up and that's why this problem came. Now if someone needs money, they have to sell the mutual funds or stocks on loss. But if someone would have invested in the debt fund, they would be enjoyed by moving the fund from debt to equity as well as for emergency they can take out the money.
Now since the equity market has gone down, it's a perfect opportunity for people to move the debt fund to equity and thus take advantage of both world. And when the market wil go up from here, they can again move the equity to debt and thus keep the ratio between the fund. So next time if someone says that FD has given good returns, tell them yes but also show them the 3 and 5 years returns and ask them to take advantage of both world.
