What is Mutual Fund Laddering Strategy Can It Beat Fixed Deposits? When we talk about growing savings, then most Indians depend on Fixed Deposits (FDs). But with frequently changing interest rates and tax rules, many investors are exploring smarter ways like mutual fund laddering techniques. If you are thinking about your mutual funds investment in India, then staying aware of this strategy can help you balance risk and return in the market.
What is Mutual Fund Laddering?
Similar to Fixed Deposit laddering, mutual fund laddering means investing in different mutual funds with multiple maturity dates or timeframes. This helps you spread the risk and make sure that you have liquidity at regular intervals of time.
For example, rather than investing ₹5 lakh in just one debt mutual fund, you can divide it equally into five different funds with maturities of one, two, three, four, and five years. Because each year, one fund matures, which gives you the freedom to invest again or use the money according to your needs.
How Does It Work?
Here’s how you can create your step plan in simple form:
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Pick suitable funds: Make sure to focus on short-term and moderate-term debt funds, because target maturity funds can be a good choice to pick.
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Stagger maturities: Pick the mutual funds that complete or mature in different years to spread out reinvestment risks.
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Reinvest smartly: When a fund matures, then remember to reinvest in a new fund at the tail end of your layered plan to keep it ongoing.
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Diversify: Merge the corporate bond funds, government bond funds, or even you can combine the hybrid fund to balance your returns and risks.
Why Choose Mutual Fund Laddering?
Mutual fund laddering provide some exciting advantages over traditional Fixed Deposits:
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Better returns: Debt mutual funds in India can deliver higher returns after the deduction on tax as compared to FDs, mainly if the bond is held for over 3 years (indexation benefit applies).
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Tax efficiency: Long-term capital gains from debt funds are taxed at 20% with indexed adjustment, often resulting in lower tax expense. Know more from SEBI
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Liquidity: Different from Fixed Deposits with penalties for premature withdrawals, mutual funds offer easy exit, which is subject to exit loads.
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Beat reinvestment risk: By staggering maturities, you can avoid locking all your money at low interest rates.
Points to Remember
While mutual fund laddering can beat Fixed Deposits in various cases, but keep these points in mind:
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Unlike Fixed Deposits, your returns are not guaranteed in mutual funds.
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Debt mutual funds have some interest rate and credit risk.
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Stay with the high-quality funds and well-established AMCs. Refer to AMFI India
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If you are still unsure, then consult a financial advisor who is registered to SEBI.
Final Thoughts
If you are searching for the best mutual fund portfolio strategy for 2025, then laddering can be a smart move to create a balance of regular income and tax saving strategy. It may not fit extremely careful investors, but for those who are ready to move beyond Fixed Deposits, it’s worth exploring.
The next time you plan your mutual funds investment in India, think about laddering strategy. Because it could help you handle interest rate changes smartly and grow your money even faster than a regular Fixed Deposit.