Think BIG : Think Retail Debt
Inflation Buster

As an advisor, one of your biggest responsibilities is to ensure protection of your clients' hard earned money. This also happens to be one of your biggest business opportunities - as most savers in India do not realise that their money is not safe.

Surprised? Especially when we know that bank deposits are the biggest form of savings in India? Are we suggesting that bank deposits are not safe? Well yes - that's exactly what we are suggesting - depending on how you define safety.

If safety means preservation of the invested corpus, you can say that bank deposits are safe (depending of course on the bank you choose). But, if you mean preservation of the purchasing power of the invested corpus, well, in most cases, bank deposits are not safe. In most cases, bank deposits earn you less than inflation on a net of tax basis - which means that the actual worth of what has been invested keeps depleting year after year - even as your client believes his money is safe.

We all know the numbers - the question is how well we have communicated these to our clients.


As the table above clearly demonstrates, what most investors focus on is the fact that a 9% interest on a bank deposit will double the corpus after 12 years, even after paying 33% tax on interest income. What most investors don't focus enough on is the fact that even double the corpus will be worth less than the original amount 12 years later, if costs keep going up 7% p.a. (inflation). Ultimately, if Rs.20,19,041 fetches you less after 12 years than what Rs. 10,00,000 buys you today, have you really preserved the purchasing power of your money? Has your money really been safe?

As an advisor, one of your biggest challenges - and opportunities - is to showcase to safety conscious investors that in trying to be too safe, they are actually eroding the value of their money. You need to showcase how you can help your clients bust the inflation demon - but without taking them down the path of equity investing, if they do not have the risk appetite for it.

This is where retail debt funds like accrual products - corporate bond funds - come into the picture. Corporate bonds as we know, earn higher yields than bank deposits. A carefully chosen and well managed portfolio of bonds offers safety as well as higher yields. Taxation of bond funds is a little more favourable than interest income. Combine the two and you have a product that can potentially beat inflation - but without investing in equity markets. And, since most accrual based products like corporate bond funds are geared more towards steady returns rather than duration plays, their NAVs are not as volatile as say income and gilt funds may be - as they do not take major duration bets. So, what you really have up your sleeve when offering corporate bond funds - are low volatility inflation busters that help your clients preserve the purchasing power of their money - without taking them down the path of equity investing - which they may or may not be willing to consider.

Think of the amount of money invested in bank deposits - think of the potential erosion of purchasing power most of these deposits face. Think of the huge opportunity you have to offer genuinely low volatility - zero equity - inflation busters to these investors. Think of the value you will add in their financial lives. Think of the huge business opportunity that awaits you. Think BIG. Think Retail Debt.

To know more about Reliance Mutual Fund's inflation buster, Click Here

Opening Bat Cash flow All Weather Fund Inflation Buster

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