If you’re an investor on the lookout for fixed-income avenues, Kisan Vikas Patra (KVP) is a viable option that may have crossed your mind. KVP is one of the popular small savings schemes offered by the Indian Post Offices. It is a fixed income product ensuring guaranteed returns with an attractive KVP interest rate.
Understanding KVP Investment
KVP is a certificate-based savings scheme which offers lucrative returns and unique features. With a maturity period of 124 months (as of 2021), the current KVP interest rate stands at 6.9% compounded annually. It’s noteworthy that the KVP rate is revised quarter wise by the government.
For instance, let’s say you invest INR 1,00,000 in KVP. Due to the compounded annual KVP interest rate of 6.9%, your sum grows around INR 2,06,904 at the end of the 124-month tenure. It essentially means that your amount doubles, offering impressive returns over the period of the tenure.
Given the attractive return rate, here are some strategies for leveraging the KVP interest rate in your investment:
Periodic Investments and Ladder Strategy
Invest regularly in KVP over an extended period to enjoy a higher interest rate. Stagger your investments over time; this way, you’re spreading risk across different time horizons and interest rates. This is known as Laddering. More importantly, it enables you to adjust your portfolio depending on the current interest rate climate of KVP.
Long-Term Financial Goals
If you aim to meet long-term financial objectives, KVP can be a beneficial tool. Considering the fixed KVP interest rate and the doubling of the sum at the end of tenure, it can act as a cushion for long-term financial planning. Moreover, it’s an excellent strategy for goals like retirement planning or children’s future education.
Risk Diversification
Strategize to diversify risk by investing in KVP along with other financial instruments. If the market is volatile, KVP investment shields you from the risks due to its fixed interest rate feature. It provides a sense of financial security since it guarantees a return on investment.
Investing in the Name of Minors
One can open KVP in the name of minor children, making it a great strategy to secure their future. Over the years, the child would reach legal age to encash the KVP certificate ensuring financial stability.
In conclusion, KVP is a beneficial investment for individuals who seek guaranteed returns over a long period. Fixed KVP interest rate, high safety, and low-risk are its advantages among other investment options. However, investors should critically assess their financial goals, risk appetite and potential returns before choosing KVP.
Summary
Investment in Kisan Vikas Patra (KVP) offers guaranteed returns with an attractive KVP interest rate. The strategies for leveraging the KVP interest rate in your investment include regular periodic investments and the Ladder Strategy, making it a tool for meeting long-term financial goals. Diversifying risk by investing in KVP along with other financial instruments shields you from market volatility due to the fixed interest rate feature. Opening a KVP in the name of minor children is a great way to ensure future financial stability. Before investing in KVP, critical assessment of individual financial goals, risk appetite, and potential returns is recommended.
Disclaimer
Always consult with a financial advisor before making an investment. The intending investors must gauge all the pros and cons of trading in the Indian financial market to steer clear of potential risks and losses.
