Check out these three solid money market funds that beat bank FDs

Check out these three solid money market funds that beat bank FDs

Henil Shah

For the principal's protection, people often choose bank fixed deposits (FD). What if we said that these top three money market funds outperform bank FDs while also carrying lesser risk? Continue reading.

One of the most traditional investment options is a bank fixed deposit (FD). Actually, the majority of the people from older generations still favour bank FDs as their preferred investment option, followed by government schemes.

 

A 2019 Securities and Exchange Board of India (SEBI) survey found that 95 per cent of Indian families choose to invest in bank FDs. Furthermore, according to Statista, people owned about Rs 46 lakh crore in bank FDs as individual assets in the fiscal year 2020.

 

This demonstrates the popularity of bank FDs in India. The table below shows the top bank FDs with the highest interest rates. It should be noted that these interest rates apply to investments of less than Rs 2 crore.

 

Name of Bank

General Citizens (% p.a.)

Senior Citizens

(% p.a.)

RBL Bank

7.0

7.5

Bandhan Bank

7.0

7.5

Yes Bank

6.8

7.5

IndusInd Bank

6.8

7.5

Duetsche Bank

7.0

7.0

IDFC First Bank

6.9

7.4

HDFC Bank

6.1

6.6

Punjab National Bank

6.1

6.6

Axis Bank

6.1

6.8

Canara Bank

6.0

6.5

HSBC Bank

6.0

6.5

IDBI Bank

5.8

6.5

Kotak Mahindra Bank

5.9

6.4

Bank of Baroda

5.5

6.5

State Bank of India

5.7

6.5

Indian Overseas Bank

5.8

6.3

UCO Bank

5.6

6.1

Indian Bank

5.6

6.1

* Interest rate for investments below Rs 2 crore. This is the maximum interest rate offered by the respective bank. These are pre-tax interest rates.

 

The average three-year rolling returns from these top three money market funds were between 7 per cent and 7.2 per cent. The three-year rolling returns were computed from September 19, 2014, to September 19, 2022.

 

3-Year Rolling Returns | Period: September 19, 2014 to September 19, 2022

Fund Name

Mean (%)

Maximum (%)

Minimum (%)

Aditya Birla SL Money Manager Fund

7.24

7.91

5.09

Nippon India Money Market Fund

7.09

7.74

4.94

HDFC Money Market Fund

7.02

7.71

5.02

Source: RupeeVest

 

The maximum returns obtained ranged from 7.7 per cent to 8 per cent, as seen in the table above. And the minimal returns achieved were roughly 5 per cent.

 

Furthermore, we can observe from this rolling returns data that none of the funds listed above has generated negative returns. When its calendar year returns are examined, it is only in the year 2021 that these funds generated returns of roughly 4 per cent.

 

This can be attributed to unfavourable bond markets. During the remaining years, these funds achieved average returns ranging from 6 per cent to 10 per cent. Having said that, even on a post-tax basis, returns of 7 per cent in three years are achievable. This is because debt funds are taxed more efficiently than bank FDs.

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