Critics might argue that the above table is misleading as corporates offer fixed deposits at higher rates. However the risk borne by the investor goes up substantially as in most cases the ‘higher return’ deposits are unsecured by nature. Hence, in case of default, the investor might lose not only the “fixed return” but also the capital invested.

Also the liquidity aspect of these schemes could be a cause for worry. In most cases a pre-mature withdrawal attracts a penalty.

Investors will have to start looking at other options to reverse the downside of fixed return schemes. Income schemes offered by mutual funds are the best bets for these investors.

Safety and stable returns are the major factors drawing investors towards fixed return schemes; this is where income schemes have an edge over other investment avenues. Since income schemes invest their corpus in government securities, bonds and debentures they are the closest to being risk-free. There are relatively scant chances of an investor losing his capital.

Leading fund managers like Mr. Rajat Jain (CIO- Principal Mutual Fund) believe that retail investors can invest in income funds for better and tax efficient returns. Clearly income funds are better equipped to counter inflation. Another distinct edge income schemes possess is the liquidity available to the investors on account of the exit option. For bearing a slightly higher degree of risk, income fund investors can be rewarded by returns that fixed return schemes could only hope to match.

The transition from fixed returns to market driven ones can be an unnerving experience for most first timers. Income schemes provide the perfect platform to make this transition. This is one step investors should take if they wish to meet their financial goals.