Shaifaly Girdharwal
Why we need to think beyond shares, mutual funds & FD’s: Let us explore other products
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:
- Equity is good but only for people who are not dependent on its income. Who has excess money and most important thing have a good advisor who not only advise about the good stocks but the most important thing, correct time to enter and exit.
- While investing in mutual funds diversification and systematic investment is necessary. If you actually want any profit then have a time horizon of at least 2-3 years and every sector don’t worth investing every time so consult your advisor for the buzzing sector. Like in past months return in equity mutual funds is very less whereas gild and debt funds are fetching handsome returns.
- Diversify your investment product wise. Very few people in India opt for other fixed income products like Tax free Bonds, NCD’s and corporate FD’s. Only well informed and HNI clients (mostly having an advisor) go for these products. Tax free bonds at this time are one of the best investment options. Recent public offer of NTPC tax free bonds was oversubscribed many times and was high in demand. Don’t worry if you miss it Tax free bonds of PFC are also in Que. Following are the details of same
| Options | Option 1 | Option 2 | Option 3 |
| Tenure of Bonds | 10 years | 15 years | 20 years |
| Maturity/Redemption Date | 10 years from Deemed Date
of Allotment |
15 years from Deemed Date
of Allotment |
20 years from Deemed Date of Allotment |
| 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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Respected Mam
Kindly advise me , I am working in punjab state power corporation Ltd
as S DO. I AM TO RETIRE ON 31-12-2016 After serving in the depth.
For 38 years. I shall get approximately 20 lacs after retirement.
In which scheme I should deposit so that I can get monthly
income regularly.
ER.MADAN SINGH SDO
P.S.P.C.L . DERA BASSI (PB)
After reading subject of Today’s Article, my expectation was very high that various alternate source of income would be covered in this article. But only income from Bonds are covered.
very true
Good Article. what is PFC written in your article. how to invest on it.