Savings A/c or Short Term Debt funds

The Indian equity markets are at dizzy heights and it seems they have taken steroids . They are running up as if they want to catch up with Ben Johnson . Ofcourse this comes with a lot of risk .
Thanks to these heights I have seen a lot of mutual Fund AMCs launching arbit schemes under various names . Though I feel most of them dont have any value addition. I have seen a lot of ppl running behind just because the new funds have no Entry Loads . Should only Equity market be our investing strategy . Why is Debt Funds not being discussed at all ?
Actually Debt Funds should also be given its due . Actually I tell you short term debt funds are more tax efficient that your saving account interests . All this assuming you are in the highest tax bracket and you file your tax returns as a nice and honest citizen . Let me explain how .

We all know SB a/c in any bank gives us a return of 3.5 percent . For an amount of say 10000 the ROI = 350 ( I hope my Maths is correct ) after a Year .
That means all 350 Rupees is taxed at your highest tax level . 350 * 30/100 = 12.25 .(Actually these numbers are small ) but the numbers proptiantely increase if the principal is more .

Lets take the same amount in a reasonable shot term debt fund . Ideally if you are in the highest tax bracket , You should be going for a divident option . this is because the dividend payout is made after the tax . So the dividend that you receive is not taxable . typically the NAV falls after a dividend payout . So you can just keep pocketing the dividend . This would be intune of about 4-4.5 5 (average performing fnuds ).It could go up higher . Another thing about short term funds are its far less riskier that Equity funds ....Of course MFs always comes witha statuatory warning . For short term funds there are no entry/exit loads too :)

You might want to visit this for more details .

Next time chose you better not park your money in SB instead think of investing short term money in Short term funds with dividend options .

Cheers,
Madhu
Money manager