But now they are taxed on a par with individual bonds: gains from both are taxed at the investor's slab rate from this financial year onward. Due to this development, many investors who in the past preferred debt mutual funds are now gravitating towards bonds.
Advantages of direct investing
One advantage of investing directly in bonds is that investors can earn a higher rate of return. In a debt mutual fund, the investor has to pay an expense ratio. This lowers the net return (gross return of the portfolio minus the expense ratio) that the investor earns. In an individual bond, he does not have to pay any fee. In a debt mutual fund, fund managers also keep cash and cash equivalents to meet redemption requests. This also lowers the returns from debt mutual funds.
Another advantage of direct investing is that the investor exercises complete control over which bonds to go for. He can choose a bond based on the return he wants to earn and the amount of risk he is prepared to take. In a debt mutual fund, the fund manager picks the bonds for the portfolio.
Three key risks
Investors need to be cognizant of the three key risks of investing in bonds: credit, interest rate, and duration risk. Credit risk is the risk of the borrower (in this case, the company whose bonds the investor has purchased) failing to pay the interest, or failing to return the principal, on time.
Esta historia es de la edición August 2023 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 8500 revistas y periódicos.
Ya eres suscriptor ? Conectar
Esta historia es de la edición August 2023 de Investors India.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 8500 revistas y periódicos.
Ya eres suscriptor? Conectar
Why Should One Consider Investing In A Large Cap Fund?
An investor’s ability to create wealth in the longterm is directly linked to how well they create an all-weather investment portfolio.
Meeting Medical Costs with Health Insurance Plans
A medical emergency can occur at any time and to any person.
Water: The Elixir of Life
If there is magic on the Planet Earth, it is contained in water - Loran Eiseley.
Unleashing Potential: The Dynamics of AI in India
After attending the Microsoft AI Tour recently, I attended a few conferences and met with some government officials over the past few weeks during my macro tour.
The Growing Role of Philanthropy in Wealth Management: A Shift Towards Purpose-Driven Strategies
In recent years, India’s economic landscape has seen a notable shift with the rise of High-Net-Worth Individuals (HNWIs), who are reshaping the financial ecosystem.
Are You Drinking Too Much Coffee? If Yes, Then You Are Taking A Big Risk!
Coffee contains caffeine in maximum percentage:
The Pathway to Building Wealth: Unlocking Prosperity through Strategic Knowledge and Investment Habits
Mr. Sanjiv Bajaj is the Jt. Chairman & MD, Bajaj Capital, building the platform for the Business leaders of the Financial Services and Advisory sector to exchange their vision, experience, and views on making the right financial decisions.
Learn the Magic of Self-Talk There is perpetual self-talk taking place inside all of us
We listen when our self-talk happens in our minds; we listen to whatever is imprinted in our memories and our past conditioning. Many a time we do not hear exactly what the other person is saying, and we form an opinion.
Bajaj Capital Redefines Prosperity: Unveiling the Next Era with the Grand Launch of Global Private Wealth
At the remarkable launch of Bajaj Capital's Global Private Wealth Channel in Goa, our team experienced Chairman Mr. Rajiv Bajaj sharing profound insights on the future and vision. He emphasized the transformative role the Private Wealth Team can play in clients' lives.
ELSS Mutual Funds: A Smart Choice for Long-Term Investing in India
The encouraging performance of the Indian economy, and the robust equity market returns for the year are among the top highlights for investors and observers of the Indian economy for 2023. This certainly makes investing in the Indian markets an attractive proposition for many people who are curious about investing and want to start their investment journey.