When it comes to invest or to build wealth 90% people do mistakes. In starting they need fast money, without any effort and they enter in shares. That results in loss of money. Then they start hating share market but then some funds advisor come and advises them for mutual funds. They start investing thinking that their money will be safe. But after all mutual funds are also a by-product of equity and it depends on market move for its return. Then completely hopeless they stick to FD and spend their entire life in this safe zone of FD.I have seen many youngsters who want to trade in equity (not even invest) and when I advise for safe products, they say no I want huge return. Then they calm down to mutual funds but hurry is again there. Some points to remember:
|Options||Option 1||Option 2||Option 3|
|Tenure of Bonds||10 years||15 years||20 years|
|Maturity/Redemption Date||10 years from Deemed Date
|15 years from Deemed Date
|20 years from Deemed Date
|Coupon Rates for Category I, II and III|
|Series of Bonds*||Tranche I Series 1A||Tranche I Series 2A||Tranche I Series 3A|
|Coupon Rate (%) p.a.||7.11%||7.27%||7.35%|
|Annualized Yield (%) p.a.||7.11%||7.27%||7.35%|
|Coupon Rates for Category IV|
|Series of Bonds||Tranche I Series 1B||Tranche I Series 2B||Tranche I Series 3B|
|Coupon Rate (%) per annum||7.36%||7.52%||7.60%|
|Annualized Yield (%) p.a.||7.36%||7.52%||7.60%|
It is offering 7.60% tax free return which comes to 10.95 % pre-tax (By MMR of 30.60%) whereas FD is offering hardly 9%. Even this 9% will be reduced soon due to rate cut of RBI.Even in long term when rate will fall further intrinsic value of this product will increase and you may earn some capital gains also.
e.g If normal Rate of interest is 10% and this product is also offering 10%.
But when RBI will reduce rates market interest rate will be less , let say 8% but still our product is fetching Rs. 10,
It market value will be =10/8*100=125
These bonds will be listed on exchange so you can sell it there.
It is nice to know and understand all products before investing in any one of them. These products have different benefits and features, their risk and return are different so we need to decide after due understanding of each of them.
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