In an exclusive conversation on ETMarkets Livestream, Agarwal explains why fixed income products — from FDs and debt mutual funds to corporate bonds — deserve a place in every investor’s portfolio, regardless of age or risk appetite.
Backed by real-life examples and relatable scenarios, he highlights how a thoughtful allocation to fixed income can help young earners build a financial foundation, support mid-career professionals with short-term goals, and offer retirees the stability they need. Edited Excerpts –
Kshitij Anand: Let us start from the basics. Many believe that fixed income investments are mainly for retirees. Why do you think fixed income should be part of every investor’s portfolio and not just for people who are heading for retirement?
Vineet Agarwal: Yes, it is a common misconception that fixed income is only for retirees. In fact, we believe that irrespective of the age group or the life stage an individual is in, volatility-free investments should be part of everyone’s portfolio. These should be linked to factors like the capital base a person has and the financial goals they are working towards.
We can understand this using a few examples. Suppose a young person in their 20s has just started earning. They need to build a capital base for themselves before dabbling in riskier asset classes like equities, crypto, or other investment avenues. First, they need to build a foundation. Then, they’ll have several goal-based investments — maybe they’re planning a trip, want to buy a bike, or incur some experiential expenses. That is where fixed income comes into play, because most other investments are long-term in nature.
Equities, for example, require a decade-long horizon. The same goes for real estate or gold. But fixed income gives you regular, predictable income — you know that after a year and a half or two years, this is the amount you’ll receive; you’re getting quarterly cash flows. It also supplements your income — which is particularly useful when salaries are typically lower at the start of one’s career.
Now, take someone in their 40s — maybe someone like me, with a child and possibly the only earning member of the family (or even with dual income). Again, there are several short-term goals to meet, and the need for a regular income stream beyond salary arises. In such cases, fixed income becomes the only reliable solution, because with options like FDs or debt mutual funds, you’re not even beating inflation — meaning you’re actually losing capital over time.However, with bonds offering returns of about 10-11% — especially with good-quality, safe bonds — you can beat inflation, generate regular income, and also build wealth over the long term.Of course, for retirees, fixed income becomes even more important. Someone who’s 60 or 65 isn’t necessarily planning for the next 10-15 years. Their investment horizon is shorter, so their allocation to fixed income can be higher — maybe 70% in fixed income and 30% in equity. For someone like me, aged between 35 and 45, the split could be closer to 50-50. But someone just starting out should have at least 20–30% in fixed income.
So yes, the allocation changes with age and circumstances, but fixed income is not just for retirees. It serves multiple purposes, as I explained.
Kshitij Anand: So, how does understanding one’s risk appetite help in deciding fixed income allocations?
Vineet Agarwal: Risk appetite isn’t just about personality; it also depends on several measurable factors. One of the first is family structure.
Now, what I mean by that is — if you have multiple earning members in a family, the risk appetite of that family can be higher. If you’re the sole earner, the risk appetite may naturally be lower.
Today, we also have DINKs — double income, no kids — and in that case, risk appetite tends to be higher. So, depending on what kind of family profile you fall into, your investment allocation can vary. For example, with multiple earners, equity allocation — which is riskier — can be higher, say 70%, with 30% in fixed income.
But if you’re the only earning member and need to manage household finances more cautiously, the prominence of fixed income increases. You’ll need to supplement your income with a regular stream, and fixed income becomes very powerful in that scenario.
Let’s say you invest ₹10–20 lakh in high-quality fixed income products yielding 10–11%. That translates to roughly ₹15,000–20,000 per month — a steady cash flow that could take care of daily expenses like groceries or domestic help. It’s almost like an additional salary.
So yes, family structure plays a key role in defining risk capacity.
Personal profile matters too. Someone well-educated, maybe from a top-tier college and working a high-paying job, can take more risk — they’ll likely find another job quickly if needed. Compare that to someone at a mid-level position with a lower salary — their risk appetite will naturally be lower.
Capital base is also a crucial factor. Some people inherit large sums from parents — their risk-taking ability is higher. But someone who’s responsible for supporting themselves and their family will need to be more conservative.
So, allocation depends on your risk profile. If you’re risk-averse, your fixed income allocation should be higher. If you’re more comfortable taking risks, it can be lower. That’s the key difference.
Kshitij Anand: To help decide allocation, the basics need to be understood. My next question is around that. Could you quickly brush up on the fundamentals and help investors understand the difference between FDs, debt mutual funds, and corporate bonds? These terms are often used interchangeably without a clear understanding of what they actually mean.
Vineet Agarwal: All three products come under the broader umbrella of fixed income. What is fixed income? It means that if you’ve invested money somewhere, you should get a fixed return — not something linked to market volatility or macroeconomic changes. You should know exactly what you’re getting.
The most traditional product — and the one most people are familiar with — is the fixed deposit (FD). All of us, including our parents, have parked surplus money in banks in exchange for a fixed return for the duration of the investment. While this product is very safe, it offers the lowest returns. From an investor’s perspective, you’re often not even beating inflation.
However, in today’s world, many small finance banks — which are themselves quite large — offer very attractive FD rates, often slightly higher than the rate of inflation. I encourage people to invest in such FDs. As a platform, we also provide access to those products.
If you recall, around 15 to 18 years ago, Kotak was offering some of the best FD returns. At that time, it was a small bank, but many people took advantage of those higher rates to earn better-than-inflation returns. That’s essentially what an FD is.
Next is the debt mutual fund. Debt mutual funds are quite simple. These mutual fund companies collect investors’ money and invest it in government bonds — predominantly government securities or treasury papers issued by the Government of India. The idea is to provide slightly better returns than a traditional bank FD. But today, FDs from small finance banks are offering returns almost equal to what a debt mutual fund provides.
However, if you invest in a debt mutual fund for more than three years, the tax advantage is better than that of an FD because it falls under the mutual fund category, which benefits from indexation.
The third product is corporate bonds. These are bonds issued by companies — they could be AAA-rated, AA, A-rated, etc., depending on the size and financial health of the company. You can invest in corporate bonds and earn returns ranging from 8% to even 13–14%, depending on the issuer. If you build a healthy portfolio, you could easily earn between 10% and 11%, which is almost double the return from a typical FD — and that too without taking on excessive risk. Of course, there is some risk involved, but relatively speaking, you can earn significantly better returns.
So, these are the three broad products in the fixed income universe.
Kshitij Anand: What role do platforms like Jiraaf play in simplifying access to fixed income products for retail investors? You touched on it a bit earlier, but could you elaborate?
Vineet Agarwal: The role of a platform like ours, especially in the context of bonds, is critical because bonds are still a relatively new investment category for retail investors.
Our first job is to identify which bonds are suitable for retail participation. Today, there might be 200 bonds from 200 companies available in the market. As a retail investor, it’s hard to know which one to pick. What we do is shortlist two or three of the best bonds in each rating category that we believe offer the best risk-return trade-off, factoring in tenure and risk.
We analyze each bond, evaluate its risks, and then — importantly — we put our own money into these bonds before offering them on our platform. In other words, we put our money where our mouth is. This helps build trust, and it also reduces decision fatigue for the investor. Instead of choosing from 200 bonds, they see a curated list of three per category, selected by Jiraaf based on thorough due diligence.
We simplify the bond universe by analyzing risk, filtering the options, and investing alongside our users. That’s the first point.
As I mentioned earlier about FDs — today, you don’t need to physically visit a bank. You can create FDs with small finance banks directly through our platform at the click of a button. You don’t even need to open a new account. For example, if you already have an account with HDFC Bank, you can create an FD with AU Small Finance Bank using the same HDFC account, right from our platform. When the FD matures, the money goes straight back to your HDFC account.
So, you’re no longer limited to investing with your existing bank. You can now pick the bank offering the best FD rates — instantly and seamlessly.
By leveraging technology, we’re making access easier, bringing in financial education, and helping investors build better portfolios and long-term wealth.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)