"I am into the second year of my first job. Some nine months ago, I started saving almost 50 per cent of my salary, since I want to buy a new car by next year. Right now, all my money is sitting tight in a savings account earning a minuscule interest. I don't want to buy shares, so do I have better options?"
27-year-old advertising executive.

"I want a savings option to park about 10-15 per cent of my savings. Something which will yield more than a savings account, but let me withdraw the amount when I want it without any operational hassles and penalties."
38-year-old software professional.

"I want my savings to get me more interest than what I get from my savings account, not affecting the liquidity, because I may need that money any time for medical expenses." 65-year-old retired banker.

What should these people do?

The tales they've heard from friends, relatives and colleagues are not very encouraging. Dabblers in stocks, especially those who got carried away by the 1999-2000 bull run, ended up in tears. Even the safety-driven investors have had to suffer more shocks than they'd bargained for. They have seen their returns diminish, leaving them with no 'guarantees' in life.

It is tempting to wring one's hands and then sit tight, hoping for the good old days to return. But what if the days of high-safety and high-returns are over?

Trust the market to throw up options. For, where there's a need, there will be a fulfiller-or so the logic of the market says. And debt Mutual Funds are selling themselves as the answer to all those woes.

Says K. V. Ramaswamy, Senior Vice President, New Initiatives, Motilal Oswal, "MFs offer need-based products. In the debt segment itself, MFs have various products from one day horizon to 6 months offering annualised returns of at least 8-10 per cent."

The debt MFs have done exceptionally well, of late, with their returns going over 15 per cent (annualised). Compare this with the lousy 6-7 per cent you get on a one-year FD with a bank. One could argue that this was because of a one-off rush for government bonds, and so it may not be sustainable, but the point is that debt market operators have outperformed others, and they ought to know their business.

As some analysts put is, so long as interest rates fluctuate, there's an opportunity in a professionally managed debt portfolio. "Investors get higher returns as compared to individual debt investments because the funds advantage from fluctuations in interest rates on account of active trading, which an individual investor can't do," says Ramaswamy.

The clincher, perhaps, is safety. Most debt funds are invested either in government securities or high-rated corporate debt. What investors must choose is their investment time frame. Debt funds offer a liquid plan (One day to three months), short term plan (One day to six months), and Gilt plan (three-to-six months), and they come without lock-ins or penalties for premature withdrawals.

Also, you don't sweat the small stuff. There are facilities (cheque book, for example) that allow you to treat the fund as a contingency resource. In all, short-term debt MFs offer an unbeatable (given the times) combination of safety, liquidity and returns.