Colleague invests Rs 5 lakh in floating-rate saving bonds. Are they good, should I do the same?

My colleague recently invested Rs 5 lakh in floating-rate saving bonds. He recommended it to me also. Please advise.

J P Shukla
Reply by Rajiv Bajaj, Chairman & MD, BajajCapital

Ideally, one should not go by anyone’s suggestion rather understand the product first before investing. However, to make you understand, these bonds, issued by the RBI, are among the safest investments available, thanks to their sovereign backing. They come with a seven-year tenure and pay interest every six months, on the 1st of January and the 1st of July. The interest is directly credited to your bank account.

Currently, these bonds offer an interest rate of 8.05% per annum. However, it’s worth noting that this rate isn’t fixed for the entire seven years. The RBI can adjust the rate either on the 1st of January or the 1st of July. The interest rate is linked to that of National Savings Certificates (NSC), which currently stands at 7.70% per annum. So, if you invest in these bonds, you’ll earn 0.35% more than what NSC holders receive.

Considering these features, it could be wise to allocate around 10% of your financial portfolio to these bonds. You can invest without needing a Demat account. However, it is also important to consider your overall investment portfolio first. Look for asset allocation strategy and also consider tking help form a planner before investing in such bonds.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at We will get your queries answered by our panel of experts.)

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