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.
This story is from the August 2023 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the August 2023 edition of Investors India.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Are You Drinking Too Much Coffee? If Yes, Then You Are Taking A Big Risk!
Coffee contains caffeine in maximum percentage:
LIC MUTUAL FUND
According to World Bank data, women represent 49.7% of the world population. In India, women represent 48.4% of the population but they contribute only around 18% of the GDP compared to 41% in China.
Maintain 15-20% exposure to US funds in your equity portfolio
2022 was a difficult year for stocks in the United States (US), particularly for the large tech companies known as FANG. Concerns about the Russia-Ukraine conflict, inflation, etc led to a significant drop in their values.
Systematic Investment Plan (Sip): Meaning, Benefits, How It Works
We all dream of buying a car, dream house, gadgets, etc. This all can come to reality if we have strong financial planning. One of the best options is to start investing in mutual funds through a SIP (Systematic Investment Plan).
How to repair your credit score
Fintechs have seen their personal loan portfolios rise at a humongous pace between 2017-18 and 2022-23. However, loans below Rs. 50,000 are showing signs of strain, according to a white paper brought out by Experian and the Digital Lenders' Association of India. If you have defaulted on a loan recently, here are steps you can take to repair your credit score.
Abhaya Here For Her Smile -
Ever wondered why brushing and flossing is so important? Well, it's not just about sparkling white teeth!
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.
India's Economic Rise and the $10 Trillion Opportunity
In the last two years, India has been the fastest-growing major economy in the world.
"Consumption is one of the most attractive investment opportunities in India"
Q 1: Your take on the recent Household Consumption Expenditure Survey? Have you observed any great change in urban or rural consumption pattern?
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.