Looking for a Product that Yields Higher than a Savings Bank Account?
March 10, 2011
We recognize that there are investors or savers who are looking for products that can provide a better yield or return than bank deposits and savings account, while still having relatively low or moderate risk levels. Many investors are willing to live with a little volatility, in return for higher returns. This is particularly true if the investors have medium term time horizon or longer.
Author : iFAST
DWS Ultra Short Term Fund
Ultra Short Term Mutual Fund is the simplest and lowest risk fund that Fundsupermart.com carries. Presently, the returns are better than the bank savings account rate @4%, with the yield being accrued daily but these funds have limited volatility albeit no downside risk so far. Thus, Ultra Short Term Funds provide a very good alternative as they provide better post tax returns and liquidity.
This fund is suitable for investors who are seeking low risk alternatives to bank savings and fixed deposits, and who are willing to withstand a small volatility in the fund in normal times. Savers and investors who have time horizon of 3 months or more will find this fund to be suitable and attractive.
Table 1: Net Yield to Maturity of DWS Ultra Short Term Fund
Yield-To-Maturity (as at 2 March 2012)
Net Yield-To-Maturity (as at 2 March 2012)
Expense (as at 26 December 2011)
DWS Ultra Short Term
Note: Yield-To-Maturity (Weighted Gross Yields to Maturity provided by fund houses less management fees) and Net Yield-To-Maturity (Weighted Gross Yields to Maturity provided by fund houses less latest expense ratio)
Comparison of DWS Ultra Short Term Fund and Savings account
Chart 1 compares the returns generated from savings account deposit which yields @ 4.0% p.a. and DWS Ultra Short Term Fund for a time horizon of seven years. Due to the power of compounding, the difference in the return is striking.
The amount of INR 10,000 placed into DWS Ultra Short Term Fund (DWS UST) seven years ago, the value would now be worth INR 15,855; the same amount in savings accounts would only be worth INR 12,823.
In fact, the returns from DWS Ultra Short Term (INR 5855) are more than double the returns gained from savings account (INR 2823) over a period of time.
In conclusion, investors should review the money they hold in savings accounts The investor today, should have second thoughts before going forward to deposit his money in the savings account as there are alternatives out there which may entail slightly higher risk, but promise better returns.
source: iFAST Compilations
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