Is Fixed Income Still Worth It When Rates Are Low?

Interest rates today are much lower than they used to be. A few decades ago, bank fixed deposits gave returns of 12 to 13 percent. Now, they offer just 6 to 7 percent. Central banks across the world, including the RBI, have kept rates low to boost economic recovery. This has made it tougher for traditional savers to earn returns that can beat inflation. 

Low interest rates mean borrowing becomes cheaper, but those relying on fixed income see limited growth in their savings. In contrast, equities have offered higher long-term returns, around 12 to 13 percent annually for the Nifty 50 over the past 20 years. Gold has also seen strong performances during uncertain times. In fact, from 2020 to 2024, gold is more than double the value. Still, both gold and equities come with risks and volatility. 

Even today, fixed income has a role. It brings stability, steady income, and capital safety, especially for retirees or cautious investors. But it needs to be paired smartly with other options. Consider dynamic bond funds, which adjust to rate changes, or credit risk funds that offer higher returns but need careful selection. A balanced portfolio combining equities for growth, gold for safety, and fixed income for stability is still the best way forward.