Debt Investment: Part 2
We are
discussing about investment asset classes in these days. In the last blog we
had discussed about debt investment. In today’s article, we are going to talk
about debt investment products and its suitability. In our country, the
awareness about debt mark is not as wide. Some debt investment avenue we are
going to discuss below:
Government Securities:
It is
issued by the government of India through RBI for borrowing from the public to
meet various spending. In simple term government take loan from public and
return that loan on fix date with fix interest rate. It is the safest product
in debt category for capital protection and return. It is also known as gilt
securities. Gilt securities include all government bonds, T-bills, state and
central govt run instruments.
Post office saving schemes:
It is very
famous among the investors as some of post office saving schemes gives saving
option and tax benefit both through various schemes. It comes with different investment
tenure and return rate. It provides safe investment opportunity to the
investors. It is the one of the largest saving vehicle for the investors.
Public Provident Funds (PPF):
PPF is also
a saving tool for wealth accumulation in long term. It come with 15 year lock
in period and provide fix rate of compounding interest. The rate of interest
announce by the govt every year. The investment in PPF and return from PPF both
are tax free. The tax saving investment limit in PPF at present is Rs 1 lakh.
Many banks are providing PPF facility in these days.
Debt Mutual Fund:
Investor
can access debt market’s benefit investing in debt mutual fund. By investing in
debt mutual funds investor get the benefit of various type of investment as
debt mutual fund deploy their money in various government securities, corporate
debt, bank securities etc. The main aim of these mutual fund are to provide
capital protection with income generation. It comes with different maturity
period so according to the need investor choose schemes very carefully.
Bank fixed Deposits:
It is
traditional investment avenue for the investors in our country and is very
popular among the investors. It comes with different maturity period. Rate of
return on these fix deposits are taxable. Its post tax return is even not able
to beat inflation but it is still popular as investors have a lot of trust in
bank for capital protection. Keep in mind, fixed deposits upto Rs 1 lakh are
covered under DICGC (Deposit Insurance and Credit Guarantee Corporation).
Corporate deposits, bonds and
debentures:
Many
corporate issues bonds, debentures for raising the money and offer a fixed rate
of return. These types of investments carry credit and interest rate risk. Many
credit agency issue the rating of these types of schemes. Understand all
aspects like rating, tenure and return before investment in these types of
schemes.
Its Suitability:
It is very
good for those investors who prefer capital protection than return. It is less
volatile than equity. It is safe bet for conservative investors. It is ideal
investment for those whose goal approaching near. Those who needs regular
income flow it is good investment for them. Before investment in debt
securities, first assess your time horizon and then invest accordingly. There
are wide ranges of debt products offer depending on your investment time
horizon.
It is very vast subject and we
cannot cover it in one article. If you want more information regarding debt
investment or you have any other query related investment feel free to ask us.
Warm regards,
Arvind Trivedi
Certified
Financial Planner
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