Subra how come you miss out important things like Budget, Rate announcements by RBI, etc…are you not a personal finance portal?

Answer:

I am not a personal finance portal. I have nothing to sell. I write because I enjoy writing. I do think I have reached the zenith of my readership. About 7k people on an average read my blog..so far a few million impressions have been made/ read and I have no business reason to write about ‘news based personal finance nonsense’ that noise papers and magazines have to write.

In my investing life I may see about 60 budgets, and 240 RBI announcements. Frankly none of this matter to me.

2. But Subra RBI decides the interest rates in the economy no?

Well, that’s a joke. In a country where 90% of the population cannot get access to banking, forget RBI being an important force in interest rate setting. RBI has an amazing policy which does not allow banks to lend to grocers, vegetable vendors, hotels, restaurants, ….except like a real estate loan. The Indian banks just lend to industries – where a combination of poor understanding and political interference makes them have tons of NPA. The easy answer is that no one knows how interest rates will move, so Subramoney does not need to write about the ‘impending’ change in the interest rates. Sure, the Reserve Bank of India  knows what they will do with the Bank rate, but that’s only the overnight interest rate for banks. Longer-term rates are set by the market – sheer demand and supply. My builder can tell me how tight the market is depending on whether some of his friends are borrowing or lending – and at what rates. Economists have predicted these rate changes poorly, and debt fund managers have many a time got even the direction wrong. Their track record on correctly calling the direction of intermediate and long-term rates is about the same as my daughter’s ability to guess whether she should take an umbrella to school. Both of them do not even know which trigger and data points are useful and important.

3. If this is the case why should I invest in a debt fund? Why not just keep cash? Importantly  Why should I take any risk with my money when cash is safe?

Though there is an emotional comfort in having it readily available, and it feels rich to see a few million lying in the savings account, holding cash IS the ultimate risk. Cash earning 4 percent annually in a savings bank account is guaranteed to under-perform inflation and thus (but SURELY)  lose spending power. Do not let the fact that cash feels good and lets you  keep your head good (and calm) stop you from investing it. It can be invested in something that at least has a chance to keep up with inflation, if not thrash it. Stash the cash where it earns at least 1 percent annually. Longer-term FDs with lesser penalties for closure penalties give bond-like returns with less risk. However, from a longer term post tax return, bond funds are better and give you more sensible returns especially if you leave the money untouched for pretty long periods of time.

http://www.subramoney.com/2013/03/debt-fund-vs-fixed-deposits/