Now as the FD rates are at all time low, yielding close to 4% per annum most people don’t know where to keep money. You can only allocate a percentage of your portfolio to alternate ! The hunt for the yield made lot of people lose money in some debt funds which had high yields.In normal times diversification through debt fund is a strength but in an extremely stressed scenario all the weak credit in a fund can collapse together eg. BOI Axa therefore less but good credit is important in the current situation. Companies which have lot of cash to ride out the market turmoil are the only one we can rely on!
Is there a mid point where we can get decent yield at reasonably low risk? The solution is corporate bonds. Until now it was very difficult for retail investors to buy corporate bonds from the exchange due to less liquidity. Treasury and HNI are able to buy these from their brokers.It’s better to choose few and credible names than to put money in a fund with multiple risky credit!
Now it is possible to buy and trade corporate bonds for retails investors using a fintech platform called GoldenPi!
Why Corporate Bonds?
- The yields are higher than most FD and you can choose the borrower you want to invest in
- You can sell the bond earlier for liquidity or as a trading call
How to make higher returns on your bond Investment.
There are 3 ways to make returns from your bond investment:
- Hold the bond till maturity and earn interest
- Hold the bond and when market stabilizes or when interest rate dips sell the bond at lower yield and book profit i.e say HDFC 2 year bond trading at 8% today. In 3 months it might trade at 7%,hence your bond portfolio (Market Value is negatively correlated to Interest )will make money which you can capitalize by selling the bond on exchange to someone who is willing to buy or sell it on the Golden PI platform.
- Carry Return: This is an interesting aspect lot of people are unaware of .
For a similar bond risk is higher for a longer tenor hence higher return. Carry is a form of reward for holding a long-dated security.
A 2 year HDFC bond might be yielding 8% and a 1 year 7%.
If you hold 2 year HDFC 8% for 1 year you will get 1% extra as it has to yield 7% after 1 year hence you end making close 9% instead of 8%
How to buy bonds?
You can buy bonds in GoldenPI. It is a platform which sources quotes from all the top brokers in the market.
You can register for free here :Register GoldenPI
There are no charges for buying bonds and they are delivered to your Demat account just like shares.
Company Background: Backed by credible promoters . Customer service is commendable too!
Which Bond to buy?
In these tough times it’s paramount you buy the safest of the names. Some of the best names you can consider buying are:
As it is evident the FD of these same company give 5-6% but we can get a 2-3% higher yield in the corporate bond market.
Conclusion: corporate bonds are a good substitute for FD provided you choose good names and are not looking for very high liquidity!
Global Investing Platform Stockal Discount Link
For buying zero cost MF and lowest Derivative Trading
Finzy Referral Code(or you can apply the code : MAN635)
(First Use the link to register then add the Code “discount50@i2i” while paying to get 50% off)
Rupee Circle Referral Code- PIND145
FinancePeer(Use Code MNJ6547)
For specific queries ping me on 9967974993 or mail me on firstname.lastname@example.org