Fixed deposit rates, bond yields, and debenture coupons have fallen; small savings rates are being reset lower; and duration-linked returns for debt mutual funds have declined. There is hardly any room for your fixed income allocation to be able to deliver the 8%-plus kind of annual returns you may have seen 18-24 months ago.
The lower returns will have an impact on the overall portfolio return as well. With equity markets near all-time highs, there are very few places to hide if you want to enhance the overall yield on your portfolio. In such times, you may be tempted to switch to securities and funds that deliver slightly higher returns. However, with the higher return comes more risk.
