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ABC of investing in Fixed Income

The income fund I invested in returned only 5% last year. I would be better off investing in the fixed deposit of my neighborhood bank. I can get 9.5% for a one-year deposit. This used to be a familiar argument till some time back. Then came the FMPs – or the fixed maturity plans from mutual funds. These FMPs looked like Godsend for the mutual fund sellers. Why? Based on the interest rate scenario at the time of launch, the returns to the investor can be easily predicted. That gives a lot of comfort to the conservative predictability-loving fixed income investor. Let us explain this and that should start with an understanding of how fixed income instruments (and the fixed income funds) work.

http://www.moneycontrol.com/india/ne...e/10/12/315391