
<p>For Indians, gold holds a special place in their hearts and investment portfolios. Its timeless allure as a hedge against inflation and haven during economic uncertainties has made it a global favourite, especially in India. But it&#8217;s not just about the financial benefits. Gold is deeply ingrained in Indian culture, considered auspicious and often associated with significant life events. This emotional connection often drives people to invest in and accumulate gold as an asset throughout their lives.&nbsp;</p>



<p>Individuals can buy physical gold in several forms like jewellery, coins, bars, and biscuits; a few risks have deterred people from investing in physical gold, and they choose the dematerialised form, SGB (Sovereign Gold Bonds). Investments in SGBs appear on ones’ demat account. Digital gold investment is subtly different from physical gold, but it is still owning actual gold but doing so conveniently online. The company providing this service acts as the intermediary that buys the physical gold on your behalf and stores it in insured and secured vaults. Customers do have an option to sell the digital gold through the service provider. Physical and Digital Gold investments of course will not be shown in demat account. No interest is earned on Digital gold investment just like no interest is earned on physical gold. In this article, we will discuss SGB vs Physical gold and help you understand the pros and cons to make an informed decision while investing in this popular metal.</p>



<h2 class="wp-block-heading"><strong>What are Sovereign Gold Bonds (SGBs)?</strong></h2>



<p>The <a href="https://www.jiraaf.com/products/sovereign-gold-bonds">Sovereign Gold Bonds (SGB) </a>Scheme, introduced by the Reserve Bank of India in 2015, offers a convenient and accessible alternative to physical gold. Released in smaller portions (tranches) every year, SGBs allow investors to buy gold bonds in grams, catering to different income brackets. The price you pay and receive upon redemption is determined by averaging the closing gold prices for the three business days before the subscription period. SGBs eliminate the need for storage and security, making gold investment hassle-free.</p>



<h3 class="wp-block-heading"><strong>Features of SGBs:</strong></h3>



<ol type="1">
<li>SGBs, being issued by the Reserve Bank of India (RBI) on behalf of the Government of India, carry the assurance of sovereign backing, making the instrument&#8217;s safety a non-issue.&nbsp;</li>



<li>Each SGB is denominated in grams. An individual can buy as low as 1 gram of gold through SGBs. The maximum subscription limit for Sovereign Gold Bonds is 4 kg for individuals and Hindu Undivided Families (HUFs) and 20 kg for trusts and other entities.</li>



<li>SGBs have a fixed tenure of 8 years, with an early redemption option after the 5th year.</li>



<li>Apart from the capital appreciation, SGBs offer an annual interest rate of 2.5%, payable semi-annually. Capital appreciation is in the form of potential increase in underlying gold price at maturity.</li>



<li>Capital gains on redemption are tax-exempt if held until maturity, i.e. 8 years.&nbsp;Annual interest of 2.5% is taxed as per income tax slab.</li>



<li>Investors can buy sovereign gold bonds via a bank and Demat account or from agents associated with post offices, nationalised banks, licensed stock exchanges, etc.</li>



<li>The bonds are sold through the Stock Holding Corporation of India (SHCIL), recognised stock exchanges—the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)—banks, and designated post offices.</li>
</ol>



<h2 class="wp-block-heading"><strong>Physical Gold: The Traditional Choice</strong></h2>



<p>Physical gold, deeply ingrained in Indian culture and investment portfolios for centuries, holds a special place in the hearts of Indian families. The belief in gold&#8217;s auspiciousness leads them to invest in gold during festivities and celebratory occasions like weddings, creating a strong emotional bond with the metal.</p>



<h3 class="wp-block-heading"><strong>Features of Physical Gold:</strong></h3>



<ol type="1">
<li>Physical gold is a tangible asset available in the form of gold coins, bars and jewellery. Jewellery incurs an additional making charge of 6-14% depending on the jewellery. The charge for making intricate designs may increase further. Buying physical gold requires investors to pay 3% as GST, which is not applicable for SGBs.</li>



<li>Physical gold incurs storage and security costs due to theft concerns.</li>



<li>Unlike SGBs, physical gold does not generate interest income. However, selling physical gold attracts capital gains tax depending on the holding period.</li>



<li>When it comes to physical gold, the purity can be a concern. However, it&#8217;s important for investors to be aware of the BIS hallmark, a crucial mark of purity and quality assurance in the gold market.</li>
</ol>



<h2 class="wp-block-heading"><strong>What is the BIS Hallmark?</strong></h2>



<p>The <a href="https://www.bis.gov.in/">Bureau of Indian Standards (BIS) </a>is a national organisation that issues a gold certification mark known as the BIS hallmark for all physical gold products. The BIS mark signifies that the gold article you&#8217;re purchasing meets the required purity standards. Following is a breakdown of what the BIS hallmark means for gold:</p>



<ul>
<li><strong>Guaranteed Purity:</strong> The hallmark certifies the purity of the gold article you are purchasing. The purity levels for BIS-hallmarked gold are 22 carats (916), 18 carats (750), and 14 carats (585). This assures you&#8217;re getting the gold purity you&#8217;re paying for.</li>



<li><strong>Consumer Protection:</strong> The BIS hallmark signifies that the gold article has undergone rigorous testing at BIS-approved laboratories. Therefore, it is a crucial consumer protection measure and promotes transparency in the gold market.</li>



<li>&nbsp;<strong>BIS Logo:</strong> The hallmark will include the BIS logo, a recognisable symbol identifying it as a BIS-certified product.</li>



<li><strong>Purity Mark:</strong> The hallmark indicates the purity of the gold, such as &#8220;18K750&#8221; for 18-carat gold and &#8220;22K916&#8221; for 22-carat gold.</li>



<li><strong>HUID (Hallmark Unique Identification Number):</strong> Recently, a unique six-digit alphanumeric code (HUID) has been included in the hallmark. This code allows for better tracking and record-keeping of gold articles.</li>
</ul>



<h2 class="wp-block-heading"><strong>Key Differences: SGB vs. Physical Gold</strong></h2>



<figure class="wp-block-table"><table><tbody><tr><td><strong>Feature</strong></td><td><strong>Sovereign Gold Bonds (SGBs)</strong></td><td><strong>Physical Gold</strong></td></tr><tr><td>Issuer</td><td>Government of India</td><td>Gold merchants</td></tr><tr><td>Denomination</td><td>1 gram to 4 kg (individuals &amp; HUFs)</td><td>Varies (coins, bars, jewellery)</td></tr><tr><td>Interest</td><td>2.5% p.a. (fixed, semi-annual)</td><td>No interest</td></tr><tr><td>Liquidity</td><td>Moderate (after 5 years)</td><td>High</td></tr><tr><td>Making Charges</td><td>None</td><td>5-25% of the gold price (depending on the form of physical gold)</td></tr><tr><td>Storage and Security Costs</td><td>None</td><td>May incur safe deposit box or locker rental fees</td></tr><tr><td>Additional Costs</td><td>No GST is applicable. Long Term Capital Gain (LTCG) will also not apply if held until maturity. However, normal demat charges apply if bought in the secondary market.</td><td>A 3% GST is levied on digital gold, and gold price offered is usually higher</td></tr></tbody></table></figure>



<h2 class="wp-block-heading"><strong>Conclusion</strong></h2>



<p>Both SGBs and physical gold have merits. For instance, if you want to invest in gold for long-term investment purposes, SGB is a good instrument. However, if you want to purchase gold for occasions, you should purchase physical gold. Diversification is key, and combining both can provide a balanced portfolio. Happy investing!</p>



<h2 class="wp-block-heading"><strong>FAQs</strong></h2>


<div id="rank-math-faq" class="rank-math-block">
<div class="rank-math-list ">
<div id="faq-question-1719985073884" class="rank-math-list-item">
<h3 class="rank-math-question ">Is SGB taxable after 5 years?</h3>
<div class="rank-math-answer ">

<p>If SGBs are redeemed with RBI, capital gains are exempt. Investors can redeem the SGB starting after 5 years on half-yearly interest payment dates</p>

</div>
</div>
<div id="faq-question-1719985085833" class="rank-math-list-item">
<h3 class="rank-math-question ">Can I convert Sovereign Gold Bonds to physical gold?</h3>
<div class="rank-math-answer ">

<p>No, you cannot convert SGBs to physical gold since they are available only in digital or paper format. However, you can sell SGBs for cash and use it to buy physical gold.</p>

</div>
</div>
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<h3 class="rank-math-question ">Are SGBs backed by physical gold?</h3>
<div class="rank-math-answer ">

<p>While SGBs issued by the RBI are denominated in grams of gold, and their price reflects the value of pure gold (999 purity), they aren&#8217;t backed by physical gold reserves.</p>

</div>
</div>
</div>
</div>

SGB vs Physical Gold: Where should you invest?


<p>Bonds are a popular choice for stable returns. They are often considered safer than stocks and can provide regular income. Bonds are debt instruments companies, PSUs, and governments use to raise capital, offering fixed income and a source of passive earnings. Understanding listed bonds vs unlisted bonds, each with its features, benefits, and risks, is crucial for making informed investment decisions.&nbsp;</p>



<ul>
<li>Listed bonds, traded on recognised stock exchanges like the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) in India, offer higher transparency and regulation. This makes them a safer option for investors, providing security in their investment decisions.&nbsp;</li>
</ul>



<ul>
<li>On the other hand, unlisted bonds, which do not trade on these exchanges, can be issued by smaller and private companies. While they may be harder to sell quickly and have less information available about the issuing company&#8217;s financial situation, they also offer the potential for higher returns, instilling a sense of optimism in investors.</li>
</ul>



<h3 class="wp-block-heading"><strong>Overview of the Indian Bond Market</strong></h3>



<p>In 2023, the Indian bond market reported more than ₹200 lakh crore value. <a href="https://www.businesstoday.in/markets/story/outlook-2023-bond-market-could-be-the-opposite-of-2022-heres-why-357575-2022-12-23">₹161.1 lakh crore</a> in government bonds, which dominate the market with a 78% share, and ₹44.2 lakh crore in corporate bonds, holding a 22% share. The overall bond market has witnessed a <a href="https://www.businesstoday.in/markets/top-story/story/indian-bond-market-value-surged-to-over-rs-200-lakh-crore-heres-what-to-expect-from-the-bond-market-in-2024-410964-2023-12-27">77%</a> growth over five years, showcasing the increasing trust and investment in government and corporate bonds. This growth is attributed to the secure and stable investment environment bonds offer, with corporate bonds generally providing higher interest rates than their government counterparts.</p>



<h2 class="wp-block-heading"><strong>Listed Bonds vs Unlisted Bonds</strong></h2>



<p>When exploring the listed bonds vs unlisted bonds in the Indian market, we find several key areas that set them apart. Here&#8217;s a simplified comparison:</p>



<figure class="wp-block-table"><table><tbody><tr><td><strong>Aspect</strong></td><td><strong>Listed Bonds</strong></td><td><strong>Unlisted Bonds</strong></td></tr><tr><td>Liquidity</td><td>Liquidity is higher due to trading on stock exchanges. Investors can buy or sell these bonds quickly during market hours.</td><td>Liquidity is lower, as these bonds are traded through over-the-counter (OTC) markets, making it harder to sell quickly.</td></tr><tr><td>Transparency</td><td>High, with real-time price information and trading volumes available due to regulation and trading on exchanges.</td><td>It is comparatively lower and has lower financial disclosures available. Thus, it is often more challenging for investors to assess the issuer&#8217;s economic health.</td></tr><tr><td>Regulatory Oversight</td><td>Subject to stringent regulatory requirements, including credit rating and disclosure norms, governed by SEBI regulations.</td><td>Less regulatory oversight, not governed by strict SEBI regulations.</td></tr><tr><td>Taxation</td><td>TDS is applicable at 10% on interest, and LTCG at 10% without indexation for holding bonds for more than 12 months.</td><td>TDS is applicable at 10% on interest, and LTCG at 10% without indexation for holding bonds for more than 36 months.</td></tr></tbody></table></figure>



<h2 class="wp-block-heading"><strong>What to check before Investing in Bonds?</strong></h2>



<p>Before looking into the specifics of listed bonds vs unlisted bonds, there are several factors one should consider:</p>



<ul>
<li><strong>Maturity Period:</strong> Bonds have varying maturity periods: short-term (up to 3 years), medium-term (4-10 years), and long-term (more than ten years). Your choice should align with your financial goals.</li>



<li><strong>Coupon Rate:</strong> The coupon rate of a bond refers to the annual interest payment made by the bond issuer to the bondholders. It is a percentage of the bond&#8217;s face value and determines the secondary income an investor can expect to receive from holding the bond. The annual and semi-annual coupon payments are typically made annually or semi-annually, depending on the bond&#8217;s terms.<br>Bond yields of listed and high-rated corporate bonds are lower, and so is the risk of default. On the other hand, the yield of unlisted bonds offers higher coupon rates to compensate for their higher risk and lower liquidity.</li>



<li><strong>Credit Worthiness of Issuer:</strong> The risk of default varies among issuers, assessed via credit ratings from AAA (safest) to D (riskiest).</li>



<li><strong>Security:</strong> Bonds are of two types. Secured (backed by collateral) or unsecured (no collateral). Secured bonds are safer but unsecured bonds often offer higher returns.</li>



<li><strong>Tax Factors:</strong> Bond income is usually taxable, but tax-free options are available, like infrastructure bonds from REC and PFC, which offer tax-free interest.</li>
</ul>



<h2 class="wp-block-heading"><strong>Investment Risks in Listed Bonds vs Unlisted Bonds: Comparison</strong></h2>



<figure class="wp-block-table"><table><tbody><tr><td><strong>Risk Factor</strong></td><td><strong>Listed Bonds</strong></td><td><strong>Unlisted Bonds</strong></td></tr><tr><td>Interest Rate Risk</td><td>More exposure to interest rate changes affects bond prices inversely.</td><td>They are less exposed to market fluctuations, but interest rate changes can still impact their valuation indirectly.</td></tr><tr><td>Default Risk</td><td>Lower, as issuers are typically more scrutinised. Defaults are publicly known, offering some level of predictability.</td><td>Higher, due to less stringent disclosure requirements. Identifying default risk requires more in-depth research of the company’s financial conditions.</td></tr><tr><td>Market Access</td><td>It is easier for individual investors to buy and sell due to availability on public exchanges.</td><td>Access might be restricted to institutional or accredited investors, limiting entry to the general public.</td></tr><tr><td>Recovery in Default</td><td>The structured resolution process through SEBI and exchanges can facilitate recovery efforts.</td><td>Recovery may be more challenging and dependent on direct negotiations or legal action.</td></tr><tr><td>Secondary Market</td><td>A robust secondary market enhances liquidity and options for exit.</td><td>A limited or non-existent secondary market can trap capital, reducing flexibility.</td></tr></tbody></table></figure>



<h2 class="wp-block-heading"><strong>Future Outlook and Trends in the Indian Bond Market</strong></h2>



<p>Bond yields were unstable after a rough 2023 with high inflation and many rate hikes. But now, with inflation slowing down and economic conditions improving, the RBI has stopped raising rates. Additionally, SEBI has reduced the face value of privately placed bonds to Rs 10,000 from the previous value of Rs 1,00,000, thus making bonds more easily available to individual investors.&nbsp;</p>



<p>That’s not it.</p>



<p>The RBI has recently declared a<a href="https://www.businesstoday.in/opinion/columns/story/rbis-record-dividend-to-govt-will-it-be-a-game-changer-for-bond-market-investors-431203-2024-05-28"> Rs 2.11 lakh crore dividend to the Government of India </a>for the fiscal year 2023-24. As a result, the 10-year benchmark dropped five basis points to 6.99% after the announcement, and the yield is also expected to be below 7% in the coming months. Also, the recent development of government bonds&#8217; inclusion in a global bond index will further support lower yields.</p>



<p>2024 may be a good time for investors to include bonds in their portfolios.</p>



<h2 class="wp-block-heading"><strong>Final Thoughts</strong></h2>



<p>The choice between listed bonds vs unlisted bonds comes from transparency, ease of transactions, and investor preference. Listed bonds offer greater transparency and are easier to buy and sell, attracting more investors and capital. Unlisted bonds, while potentially offering higher returns, need more information availability and liquidity. Assessing one’s risk tolerance and investment goals before deciding is essential.</p>



<h2 class="wp-block-heading"><strong>FAQs</strong></h2>


<div id="rank-math-faq" class="rank-math-block">
<div class="rank-math-list ">
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<h3 class="rank-math-question "><strong>Which offers higher returns, listed or unlisted bonds?</strong></h3>
<div class="rank-math-answer ">

<p>Generally, unlisted bonds offer higher interest rates compared to listed bonds. This compensates for their lower liquidity and potentially higher credit risk.</p>

</div>
</div>
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<h3 class="rank-math-question "><strong>Are listed bonds safer than unlisted bonds?</strong></h3>
<div class="rank-math-answer ">

<p>Listed bonds are generally considered safer due to factors like:<br /><strong>Regulation:</strong> Issuers of listed bonds must comply with stricter rules set by SEBI (Securities and Exchange Board of India).<br /><strong>Transparency:</strong> Listed bonds offer more transparency as their performance and issuer information are readily available on exchanges.</p>

</div>
</div>
<div id="faq-question-1720000265914" class="rank-math-list-item">
<h3 class="rank-math-question "><strong>Is it easier to buy and sell listed bonds?</strong></h3>
<div class="rank-math-answer ">

<p>Yes, listed bonds are much easier to buy and sell on stock exchanges. You can place orders through brokers and benefit from market liquidity. Unlisted bonds require contacting the issuer directly or finding a buyer/seller through private channels.</p>

</div>
</div>
<div id="faq-question-1720000285553" class="rank-math-list-item">
<h3 class="rank-math-question "><strong>Is it easier to buy and sell listed bonds?</strong></h3>
<div class="rank-math-answer ">

<p>Yes, listed bonds are much easier to buy and sell on stock exchanges. You can place orders through brokers and benefit from market liquidity. Unlisted bonds require contacting the issuer directly or finding a buyer/seller through private channels.</p>

</div>
</div>
<div id="faq-question-1720000320218" class="rank-math-list-item">
<h3 class="rank-math-question "><strong>Who should consider investing in unlisted bonds?</strong></h3>
<div class="rank-math-answer ">

<p>Investors who:<br /><strong>Have a high-risk tolerance</strong>: Unlisted bonds carry higher credit risk and are less liquid.<br /><strong>Seek higher rewards:</strong> They offer potentially higher interest rates than listed bonds.<br /><strong>Have investment expertise:</strong> Due diligence is crucial for unlisted bonds as less readily available information is available.</p>

</div>
</div>
</div>
</div>

Listed Bonds vs Unlisted Bonds: A Comparative Guide


<p>The equity markets can be volatile, especially during economic downturns, and possess the power to wipe out investors’ wealth in one day. Take the COVID-19 lockdown-induced sell-off in 2020, for instance. Investing in debt instruments can mitigate the risk to a large extent. They offer moderate to high returns depending on whether they are listed or high-yield debt instruments. They have relatively lower risk than equity products, protecting your portfolio from negative market reactions.</p>



<p>This article will explore the risks associated with high-yield debt instruments and how you can manage them.</p>



<h2 class="wp-block-heading"><a></a><strong>Risks of High-Yield Debt Instruments</strong></h2>



<p>High-yield debt instruments are popular because they offer higher returns and diversification benefits.</p>



<p>According to CRISIL, bonds with a long-term credit rating between AAA and BBB are considered investment-grade bonds, and ratings between BB+ and D are non-investment-grade bonds. The higher the credit rating, the lower the returns in general.</p>



<p>Debt investment instruments can be broadly:</p>



<ul>
<li>Listed and rated by an external credit rating firm.</li>



<li>Unlisted rated by an external credit rating firm or unrated</li>
</ul>



<p>Let’s understand them and the risks associated with them.</p>



<figure class="wp-block-table"><table><tbody><tr><td><strong>Grade</strong></td><td><strong>India Research Ratings</strong></td><td><strong>ICRA</strong></td><td><strong>CRISIL</strong></td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND AAA</td><td>Aaa</td><td>AAA</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND AA</td><td>Aa1</td><td>AA+</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND A</td><td>Aa2</td><td>AA</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND BBB</td><td>Aa3</td><td>AA-</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND A1</td><td>A1</td><td>A+</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND A2</td><td>A2</td><td>A</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND A3</td><td>A3</td><td>A-</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND AAA (SO)</td><td>Baa1</td><td>BBB+</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND AA (SO)</td><td>Baa2</td><td>BBB</td></tr><tr><td>Investment grade bonds&nbsp;</td><td>IND A (SO)</td><td>Baa3</td><td>BBB-</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND A4</td><td>Ba1</td><td>BB+</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND BB</td><td>Ba2</td><td>BB</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND BB(SO)</td><td>Ba3</td><td>BB-</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND B (SO)</td><td>B1</td><td>B+</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND C (SO)</td><td>B2</td><td>B</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND D (SO)</td><td>B3</td><td>B-</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND A4 (SO)</td><td>Caa</td><td>CCC</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND C</td><td>Ca</td><td>CC</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>IND D</td><td>C</td><td>C</td></tr><tr><td>Non-investment grade bonds&nbsp;&nbsp;</td><td>&nbsp;</td><td></td><td>D</td></tr></tbody></table></figure>



<h2 class="wp-block-heading"><a></a><strong>Listed and Rated Debt Instruments</strong></h2>



<p>Listed and rated debt instruments are publicly traded financial securities, like bonds, issued by governments and corporations to raise capital. They are listed on capital exchanges, providing possible liquidity to investors. External credit rating agencies, such as CRISIL, ICRA, CARE, and Fitch, assess the issuer&#8217;s creditworthiness and assign a credit rating to the debt instrument, allowing it to be traded in the secondary market.</p>



<p><strong>Listed bonds can be secured by underlying collateral or</strong> unsecured. However,<strong> all unlisted bonds are secured by the underlying collateral.</strong></p>



<p><strong>Similarly, listed bonds mandatorily have to be rated while unlisted bonds can be rated or not.</strong></p>



<p>Some of the listed and rated debt securities include government bonds, corporate bonds, Sovereign Gold Bonds, and Structured Debt Instruments.</p>



<h3 class="wp-block-heading"><a></a><strong>Risks of Listed and Rated Debt Instruments</strong></h3>



<ol type="1" start="1">
<li><strong>Interest Rate Risk</strong></li>
</ol>



<p>This occurs when the market interest rate changes after the investor buys the corporate bond. Long-term bonds are particularly sensitive to rate changes than short-term bonds.</p>



<p>For example, imagine you have bought a bond worth ₹1,000 with a 3% interest rate. A year later, the market interest rate rose to 4%. This will make your bond less valuable and drive its market price down. It will also pay lesser returns than the new series of bonds.</p>



<p>In a reverse situation, the market interest rate falls after you have invested, and you stand to gain. Your bond becomes more valuable as you lock in a higher interest rate.</p>



<ol type="1" start="2">
<li><strong>Credit Risk</strong></li>
</ol>



<p>To determine credit risk, investors must assess a corporation’s creditworthiness, financial health, economic cycles, and industry conditions. As a rule of thumb, higher-rated companies have lower credit risk. These companies are more creditworthy because they have strong balance sheets. Sovereign-backed government bonds (T-Bills, G-Secs) are very low risk.</p>



<ol type="1" start="3">
<li><strong>Liquidity Risk</strong></li>
</ol>



<p>There could be a possibility that <a href="https://www.jiraaf.com/glossary#:~:text=The%20potential%20for%20an%20organisation%20to%20encounter%20difficulties%20in%20sufficiency%20of%20cash%20or%20liquid%20assets%20for%20managing%20daily%20operations%20or%20debt%20repayments.%20From%20an%20investor%20standpoint%2C%20it%20is%20ability%20to%20liquidate%20an%20investment%20into%20cash%20before%20maturity" title="">fluctuations in a bond’s price</a> may make it difficult to buy or sell it. Bonds with lower liquidity would witness a wider bid-ask spread. In such cases, the corporate bond may have to be sold at a value lower than its intrinsic value.</p>



<ol type="1" start="4">
<li><strong>Inflation Risk</strong></li>
</ol>



<p>Inflation reduces bond investors&#8217; real return by reducing the purchasing power of future interest and principal payments. If inflation exceeds expectations, fixed interest payments may not keep pace with rising living costs.</p>



<h2 class="wp-block-heading"><a></a><strong>Unlisted Debt Instruments</strong></h2>



<p><strong>Unlisted but rated debt instruments</strong> are high-yield debt instruments with credit ratings by external credit rating agencies. They are not traded on public exchanges. They are usually curated/traded in private markets or over-the-counter (OTC) platforms.</p>



<p>Some examples of unlisted and rated debt instruments include corporate bonds issued by mid- to large private companies across sectors, including Non-Banking Financial Companies (NBFCs), manufacturing, e-commerce, fashion, consumer goods, real estate, and power. Sometimes, these private entities are subsidiaries of large public-listed parent companies.</p>



<p><strong>Unlisted and unrated debt instruments</strong> are high-yield debt instruments not traded on public exchanges. They do not carry an external credit rating from credit rating agencies. They are curated via private transactions and sold via over-the-counter (OTC) online platforms or via offline transactions.</p>



<p>Some of the unlisted and externally not rated debt instruments include venture debt (start-ups), small corporates, real estate, and structured debt products.<strong></strong></p>



<h3 class="wp-block-heading"><strong>Risks of Unlisted Debt Instruments</strong></h3>



<ol type="1" start="1">
<li><strong>Liquidity Risks</strong></li>
</ol>



<p>These debt instruments are not listed on exchanges. Thus making it difficult for investors to sell or liquidate their holdings.</p>



<ol type="1" start="2">
<li><strong>Default Credit Risk</strong></li>
</ol>



<p>There is always the risk of default by the issuer, which essentially is the borrower&#8217;s inability to make some or all the promised payments. The potential loss for the investor is in terms of both principal and interest payments. The absence of an external credit rating increases the risk as an external independent credit firm does not review and rate the instrument.</p>



<ol type="1" start="3">
<li><strong>Valuation Uncertainty</strong></li>
</ol>



<p>Unlisted debt may contain limited information compared to listed debt securities, making it challenging for investors to determine the fair market value of their investments.</p>



<ol type="1" start="4">
<li><strong>Interest Rate Risk</strong></li>
</ol>



<p>Changes in market interest rates can affect the value of non-listed debt instruments, particularly those with fixed interest rates, potentially resulting in opportunity costs for investors.</p>



<h2 class="wp-block-heading"><a></a><strong>How to Manage Risks</strong></h2>



<p>As a first step, investors must understand their goals and risk appetite. Debt instruments that deliver higher returns generally carry higher risk, and vice versa.</p>



<p>The second step is to narrow down the investment opportunities that align with one&#8217;s goals and risk appetite.</p>



<p>Furthermore, investors must conduct their due diligence by analysing the information about the company&#8217;s financial health, business model, and management team. This will help narrow down the list further.</p>



<p>The fourth step is to define an investment allocation (for example, allocate 10-20% of your overall investment portfolio).</p>



<p>Lastly, diversify and invest in selected high-yield debt Instruments that you have narrowed down. By diversifying your portfolio across different debt investment opportunities across sectors, risk ratings, high/low yields, and tenure, you can earn a good risk-adjusted portfolio return.</p>



<h2 class="wp-block-heading"><a></a><strong>Conclusion</strong></h2>



<p>High-yield debt investments are an increasingly popular option for investors looking to boost their returns and diversify their portfolios. These investments offer higher yields than traditional fixed-income securities but also come with higher risk.</p>



<p>The key is to balance risk and reward. These opportunities can add value to your investment portfolio, delivering good risk-adjusted returns and generally carrying lower risk than stocks and/or equity-based mutual funds.</p>



<p>The alternative debt space is rapidly developing in India, thus increasing investment opportunities for individual investors. If you’ve considered adding high-yield debt investments to your portfolio, now is the time!</p>


How to Manage Risk in High-Yield Debt Instruments?


<p>Gold is always a dear investment choice for Indians for its timeless value and stability. Gold is also a principal commodity for global trade. As a retail investor, it is always a tough choice if you have to decide between investing in physical gold or Sovereign Gold Bonds, but this can be solved if you <a href="https://www.jiraaf.com/blogs/goal-based-investing-the-best-way-to-achieve-your-financial-goals" target="_blank" rel="noreferrer noopener">keep your financial goals</a> at the forefront while weighing the pros and cons of each.</p>



<p>This article delves into the nuances of both choices, comparing the merits and drawbacks of physical bullion and SGBs.</p>



<h2 class="wp-block-heading">Understand Sovereign Gold Bonds (SGB)</h2>



<p>SGBs are a type of Government bond issued by RBI on behalf of the Government of India at an issue price. These bonds are denominated in multiples of gram(s) of gold with a minimum basic investment equating to 1 gram of gold. It offers a bond interest rate of 2.5% pa over and above possible gold price appreciation. RBI issues SGBs in 2 to 3 tranches during the financial year. These bonds have a maturity of 8 years with a lock-in period of 5 years. At the time of maturity, the bonds would be automatically redeemed, and you would receive returns based on the prevailing price of gold.</p>



<h2 class="wp-block-heading">Benefits of Investing in Sovereign Gold Bonds (SGB)</h2>



<ul type="1">
<li><strong>Sovereign Guarantee:</strong> This simply means it is backed by the government of India and an assurance is provided that the financial obligation associated with it will be fulfilled. This substantially reduces the risk to almost zero.</li>
</ul>



<ul>
<li><strong>Pays Interest:</strong> SGBs offer interest of 2.5 percent per annum if you are holding more than Rs. 1 lac, and the interest is paid semi-annually.</li>
</ul>



<ul>
<li><strong>No Additional charges: </strong>While physical gold in jewellery attracts hefty making charges as well as GST which may add up to an additional 15-30% on your purchase value, this can be eliminated in the case of SGBs.</li>
</ul>



<ul>
<li><strong>Tax Exemptions on Capital Gains: </strong>You will enjoy tax benefits on capital gains made upon maturity. If held until maturity (eight years), the capital gains on redemption are entirely tax-free.</li>
</ul>



<ul>
<li><strong>Online Buying Discount:</strong> Reserve Bank of India (RBI) RBI gives a discount of INR 50/- per gram if we purchase Sovereign Gold Bonds via mobile banking or online bond platforms.</li>
</ul>



<p>While we have discussed the key benefits of investing in SGBs, it also comes with certain risks like liquidity risk and market volatility risk.</p>



<p>In the case of selling SGBs between 5 to 8 years, a Long-Term Capital Gains (LTCG) tax of 20% is applicable. Additionally, the interest earned is subject to taxation based on the investor&#8217;s applicable income slab rates.</p>



<h2 class="wp-block-heading">The Pros &amp; Cons of Investing in Gold in its Physical Form</h2>



<p>Physical gold has global recognition and liquidity making it easy to sell, and its ownership provides a sense of control and security. However, it is equally essential to understand the risks associated with it before we conclude.</p>



<h2 class="wp-block-heading">Why should you think twice before investing in physical gold?</h2>



<ul type="1">
<li><strong>Higher transaction cost: </strong>Hefty-making charges levied by the jeweller, and GST, add to the overall cost which makes it a loss-making investment if held for the short term. Not only this at the time when you are selling gold you end up paying dealer commissions.</li>
</ul>



<ul>
<li><strong>Storage costs and security concerns:&nbsp; </strong>Renting a safe locker to store gold can be an expensive affair and if stored at home comes with a risk of being lost or stolen.</li>
</ul>



<ul>
<li><strong>Lack of quality assurance &amp; cheating</strong>: While the government has implemented strategies to standardize the quality of gold across the country, there are still concerns regarding the same in the consumer&#8217;s mind.</li>
</ul>



<ul>
<li><strong>Returns on liquidation only: </strong>Unlike SGBS, the returns on physical gold can only be realised when you sell it, however on SGBs you earn regular fixed-income and automatic liquidation in 8 years.</li>
</ul>



<h2 class="wp-block-heading">The Paramount Query: Which option should you opt for?</h2>



<p>It purely depends on your investment goals, asset allocation, risk appetite, liquidation priorities, and current life stage. For example, if you are looking forward to getting your children married soon physical gold in the form of jewellery would make more sense for you as gifts when compared with gold bonds.</p>



<p>If you are one who is investing in gold for long-term and looking for a low-cost government-backed investment option, SGBs could be great option in terms of secure returns.</p>



<h2 class="wp-block-heading">Where to buy sovereign gold bonds?</h2>



<p>If you have decided to go for SGBs it is not very complicated to buy them. You can purchase SGBs through online bond platforms, banks, or brokerage houses.</p>


Gold Ownership Dilemma: Physical Bullion or Sovereign Gold Bonds (SGBs)


<p>The feeling of knowing your tomorrow is secured brings a lot of relief. Fortune favors those who are prepared, and writing a will is a vital step in the life preparedness drill to safeguard the interest of your loved ones.</p>



<p>Let’s read the story of Mr. Raghav Malhotra who seeks the peace that comes with being prepared.</p>



<p>Raghav is a successful investment banker who has built a diverse portfolio that spans various asset classes such as stocks, mutual funds, bonds, and alternative investments. He has thoughtfully named his wife and sister as nominees to ensure their financial security across the various asset classes he owns. He is also a proud owner of two beautiful flats in Navi Mumbai.&nbsp; Recognizing the importance of comprehensive financial planning, he has taken the proactive step of drafting a will. Raghav&#8217;s commitment to securing his assets, coupled with his thoughtful consideration of his family&#8217;s financial future, showcases his responsible approach to wealth management.</p>



<p>Don’t you want to feel the tranquility of securing your assets for tomorrow?</p>



<p>Deep down, you yearn to experience the same sense of security that Raghav does, but here’s the brass track: writing a will is remarkably straightforward once you decide to do so. This blog aims to demonstrate just how effortless it is to write a will. You will get to know the role played by the nominee in the process of writing a will and get a clear distinction between a nominee and a legal heir.</p>



<h2 class="wp-block-heading"><strong>Understanding nomination and how it is different from a will</strong></h2>



<p>Nomination is typically associated with specific assets, such as bank accounts, insurance policies, treasury bills, or any alternative investments. It allows you to specify a nominee who will have the legal right to distribute those assets. However, the nomination will not include assets such as real estate or your personal belongings including the physical gold jewelry, which you will need to include in a will.</p>



<p>A will may encompass all assets owned by you, including bank accounts, insurance policies, immovable property, valuable possessions, and financial investments like corporate bonds or commercial property investments. It provides a comprehensive framework for the distribution of your assets and allows you to designate specific beneficiaries, outline any conditions or restrictions, and appoint an executor of your choice to oversee the execution of specific wishes.</p>



<h2 class="wp-block-heading"><strong>The contrast between a nominee and a legal heir</strong></h2>



<p>A nominee is an individual chosen by you to act on your behalf in matters related to assets or investments. Typically, a nomination is done for financial accounts, insurance policies, or businesses that you hold. It&#8217;s crucial to note that being a nominee doesn&#8217;t automatically make someone the legal owner of the assets. Instead, the nominee acts as a trustee or custodian until the distribution of assets is determined. Their role primarily revolves around facilitating the transfer of assets to the rightful beneficiaries according to your wish.</p>



<p>On the other hand, a legal heir is entitled to inherit your assets and properties based on the applicable laws of inheritance. These laws, such as interstate succession or the terms outlined in a valid will, determine who qualifies as a legal heir. Depending on the specific laws of the jurisdiction, legal heirs typically include immediate family members like spouses, children, parents, or siblings. The legal system ensures a fair distribution of assets among the rightful heirs when there is no valid will or as per the provisions mentioned in the law.</p>



<h2 class="wp-block-heading"><strong>Demystifying the nomination of loved ones</strong></h2>



<p>When planning your asset transfer, it&#8217;s important to consider nominating a loved one. By designating them as a nominee, you provide them with the legal authority to distribute your assets according to your wishes.&nbsp; A loved one as a nominee will ensure that someone you know is directly involved in the process of asset transfer and has the responsibility of safeguarding your assets. It serves as a preventive measure against banks or the government acquiring unclaimed assets. Hence nominating a loved one establishes a sense of trust and allows for a smoother transition of your assets, providing peace of mind for both you and your beneficiaries.</p>



<h2 class="wp-block-heading"><strong>Who has the final authority?</strong></h2>



<p>According to the Indian judiciary system, the right of the legal heir supersedes the right of a nominee. This means that your legal heir will ultimately have the final say over your assets and properties after you. Their entitlement is determined by the applicable laws of inheritance and the provisions outlined in a valid will. A nominee is like an agent who will look after your assets until the time they can be passed on to the legal heirs designated in your will. While the nominee may have temporary control or possession of the assets, it&#8217;s crucial to recognize that the legal heir has the ultimate rights and ownership as defined by the legal framework.</p>



<h2 class="wp-block-heading"><strong>Who should prioritize writing a will?</strong></h2>



<p>The truth is anyone can write a will, but there are specific circumstances that make it a matter of priority to have one prepared. Let&#8217;s explore a few situational circumstances..</p>



<p><strong>Senior Citizens</strong>:&nbsp; If you are a senior citizen, it&#8217;s crucial to write a will. It allows you to clearly outline your wishes for the distribution of your assets, and any potential conflicts can be avoided. Writing a will provides you with peace of mind and ensures that your assets are distributed according to your intentions.</p>



<p><strong>Parents with Minor Children:</strong> If you have minor children, writing a will becomes essential. It enables you to designate a guardian who will take care of your children in the unfortunate event when you are not around. By specifying your wishes in a will, you can ensure that your children are in the care of someone you trust and who shares your values.</p>



<p><strong>Complex Business Families:</strong>&nbsp; If you are part of a complex business family, or a Hindu Undivided Family (HUF) structure, writing a will becomes a priority. It allows you to plan for the smooth transfer of assets and ensures the smooth continuity of your family business. By addressing potential complexities through a will, you can prevent disputes and safeguard the interests of your family members.</p>



<p><strong>People with Specific Distribution Wishes:</strong> If you have specific wishes regarding the distribution of your assets, it is important to write a will. Whether you want to support a charitable cause, provide for a beloved pet, or have unequal distribution among beneficiaries, a will allows you to clearly express your intentions. By documenting your specific distribution wishes, you ensure that they are legally binding and follow your passing.</p>



<h2 class="wp-block-heading"><strong>Conclusion,</strong></h2>



<p>A will is a comprehensive document that outlines your wishes for the distribution of your assets, and it is essential to keep it ready even if you are in your 30s or later regardless of your health condition. Writing a will is relatively easy once you aggregate and list all your assets. Following which, you can just draft the will on a regular piece of paper or utilize electronic will creation platforms such as Willjini and ezylegal documenting distribution of assets to your loved ones. It is advisable to include a minimum of two witnesses to the will, who can be individuals like lawyers, doctors, friends, or family members.</p>



<p>By making diligent efforts in writing a will, you not only safeguard your assets but also find peace while ensuring a solid foundation for your family&#8217;s prosperity.</p>


The Peace that Comes with Planning Your Inheritance


<p>Are you an aggressive saver, shrewd investor, or on a journey towards wealth creation, whatever your investment style is, the National Pension Scheme (NPS) offers excellent opportunities you wouldn&#8217;t want to overlook. In the past decade, NPS has gained popularity among individuals of all ages due to its investor-friendly features and flexibility. With the increasing awareness of retirement planning and a rising number of salaried investors embracing early retirement, the subscriber base of NPS is growing rapidly.</p>



<p>This blog aims to provide you with enough information on NPS, the process of signing up, its benefits, the paperwork, returns, and withdrawal details associated with this scheme.</p>



<h2 class="wp-block-heading"><strong>Benefits of NPS</strong></h2>



<p>The NPS is an integrated investment and pension plan that has a plethora of benefits that you would want to take advantage of. Let us look closely and see how it can be beneficial to your financial plans:</p>



<h3 class="wp-block-heading"><strong>Income Generation</strong></h3>



<p>NPS is a source of income after retirement particularly for those of you who work in the private sector. The scheme encourages employees to invest in a pension account regularly throughout their careers. Upon retirement (at the age of 60 years), subscribers can withdraw a certain proportion of their corpus, and the remaining will be received as a pension payout after their retirement.</p>



<h3 class="wp-block-heading"><strong>Tax Breaks</strong></h3>



<p>The tax breaks of NPS are unmatchable among all other pension schemes. Subscribers who have already utilized the ₹1.5 lakh tax deduction under section 80C can further reduce their tax liability by contributing an additional ₹50,000 under section 80CCD.</p>



<h3 class="wp-block-heading"><strong>Flexibility</strong></h3>



<p>Individuals who have signed up for the scheme have the flexibility to modify their asset allocation up to four times each year. Additionally, they can invest in diverse funds managed by varied fund managers including HDFC, ICICI or Axis. One can also opt for one of the three Lifecycle funds that dynamically adjust the asset mix as they get older.</p>



<h3 class="wp-block-heading"><strong>Market Linked Returns</strong></h3>



<p>The ROI of NPS is based on how it performs in the stock market. Though these investments carry market risks its returns are mostly higher than the traditional debt instruments like FDs or PPF. It is strictly regulated by the PFRDA so the chances of malpractice are almost negligible.</p>



<h2 class="wp-block-heading"><strong>Opening an NPS or Permanent Retirement Account Number (PRAN) Account</strong></h2>



<h3 class="wp-block-heading"><strong>Online:</strong></h3>



<p>It is very quick and easy to open a PRAN account online. To register for NPS, visit enps.nsdl.com, choose document type (Aadhaar, PAN, or Digi locker), and select application type and residential status proceed Be careful in choosing the account type (Tier 1, Tier II, or both) and provide details. Tier 1 offers tax benefits and Tier II offers more flexibility. Select pension fund managers and investment options, and do not miss to enter nominee information. Authenticate the relevant details and finally download the PRAN card with the unique 12-digit number.</p>



<h3 class="wp-block-heading"><strong>Offline:</strong></h3>



<p>To open an NPS account, visit the POP-SP (POP-Service Provider), which is the branch network providing NPS services. Fill out the registration form and submit it with mandatory KYC documents and initial contributions. Your application will be sent to CRA (Central Record Keeping Agency) for PRAN and they will provide the account details and password to access the PRAN account.</p>



<h2 class="wp-block-heading"><strong>Essential Documents for PRAN</strong></h2>



<p>The Mandatory documents that need to be submitted for PRAN:</p>



<ul>
<li>Recent photograph</li>



<li>Proof of identity &#8211; Aadhaar, Passport</li>



<li>Proof of address &#8211; Voter’s id, driving license, Telephone bill, electricity bill</li>



<li>Age/ date of birth proof &#8211; PAN Card or passport</li>



<li>Overseas citizens will need to furnish their OCI card</li>
</ul>



<h2 class="wp-block-heading"><strong>Knowing NPS accounts Tier1 and Tier II</strong></h2>



<p>NPS offers two account types for subscribers:</p>



<h3 class="wp-block-heading"><strong>Tier 1: </strong></h3>



<p>The primary retirement account with withdrawal restrictions is designed for long-term planning and tax benefits. Withdrawals from this account are allowed at retirement (at 60 years) or under specific circumstances.</p>



<h3 class="wp-block-heading"><strong>Tier II: </strong></h3>



<p>This account provides flexibility in withdrawals and is suitable for short-term goals. However, you will not get any additional tax benefits.</p>



<h3 class="wp-block-heading"><strong>Tier 1 vs. Tier II: </strong></h3>



<p>When comparing the two account types, it is important to consider their distinct features. Tier II gives higher returns, but it is relatively riskier than Tier 1, while Tier 1 follows a conservative approach for lower risk. On the other hand, Tier 1 offers higher long-term benefits including tax benefits, while Tier II provides liquidity benefits. Choosing between them depends on goals, risk tolerance, and liquidity needs. Based on past subscriber behavior Tier 1 is much preferred for retirement planning and tax benefits, over Tier II.</p>



<h2 class="wp-block-heading"><strong>How to build your NPS retirement corpus?</strong></h2>



<p>To build a successful NPS retirement corpus, it is important to start saving early and make consistent contributions. Choose investments that best match your risk tolerance and desired outcomes, taking inflation into account. As your income grows, be sure to top up your portfolio accordingly. Make sure you regularly readjust your portfolio and adjust your investment strategy depending on life goals while staying abreast of market trends. Gradually increase the amount you are investing in order to maximize growth opportunities.</p>



<h2 class="wp-block-heading"><strong>Return on NPS</strong></h2>



<p>The returns you generate from NPS will be dependent upon the performance of the account type and market performance, making it advantageous to start investing earlier for the potential growth of your retirement corpus.</p>



<h2 class="wp-block-heading"><strong>Withdrawal choices in NPS</strong></h2>



<p>Withdrawal rules differ between the two Tier accounts. Tier 1 has more restrictions, while Tier II allows withdrawals at any time. Tier 1 is considered more complex but offers tax benefits. Tier II is voluntary and provides flexibility. To begin, contribute at least 10% of your salary to Tier 1, and consider Tier II as a supplement. Keep in mind that you cannot withdraw the entire NPS corpus at once; one portion is allowed to be withdrawn while the rest of the corpus needs to be used to purchase an annuity that pays regular installments.</p>



<h2 class="wp-block-heading"><strong>Conclusion</strong></h2>



<p>Now that you know the real advantages of NPS, it is safe to say that it offers both tax advantages and good investment returns making it a great investment choice for everyone. However, it is always recommended to diversify the investments.</p>


Unlocking the Competitive Edge of NPS


<p>To paraphrase Robert Kiyosaki: ‘Let your money work for you.’</p>



<p>Sure. But what does this mean for those who are not so well-versed in financial matters?</p>



<p>After all, if it were so easy to grow one’s wealth, wouldn’t everyone have done it by now?</p>



<p>So, the question is: “Savings, trading, or investment — <strong>where to invest my money</strong>?”</p>



<p>No matter what your current age is or where you are in your life cycle, setting aside some money as “savings” in liquid instruments is essential, while the other two have more variables to consider.</p>



<p>And more variables equate to taking more risk.</p>



<p>But then, we have all heard of the adage: No risk, no gain. Playing it safe doesn’t always bear fruit — at least not if we want our money to work for us!</p>



<p>So, if you are still wondering <strong>where to invest money to grow wealth, </strong>whether there are <strong>less risky investments with competitive returns in India</strong>, or if trading or investing is even the right move for you at this juncture of your life, trust us when we say we can understand your sentiment.</p>



<p>That’s why, in this article, we have tried to delve into the three basic financial planning principles — Saving, Trading, and Investing — and discuss their upsides and downsides in light of the <strong>best investment options </strong>availablefor an average Indian keen on wealth creation and management.</p>



<p>Let’s Start from Scratch:</p>



<h2 class="wp-block-heading"><strong>What Is Saving, Trading, And Investing?</strong></h2>



<p>Before we get into the nitty-gritty of these financial building blocks, let’s review the basics.</p>



<h3 class="wp-block-heading"><strong>What is Savings?</strong></h3>



<p>You can set aside a certain portion of your income for a rainy day or for more significant short-term plans. It could be anything from a medical emergency to a downpayment for a new house or a vacation.</p>



<p>Now, if you choose to simply put ALL your money in savings accounts or fixed deposits (FDs) or rely entirely on PPF to secure your life after your retirement, you would probably end up with a <em>very </em>small fortune from the interest you would accrue for the money you managed to set aside over the years.</p>



<p>Obviously, there will not be sufficient financial gain from the money put aside in savings. But of course, it also means that there is relatively far less risk of losing money owing to the fluctuations in the stock market — as would be the case with trading and most investment plans.</p>



<h3 class="wp-block-heading"><strong>What is Trading?</strong></h3>



<p>If you’re a high-risk, high-gain kind of person, and willing to put the necessary time and effort, trading could be a great option for wealth creation. Trading refers to buying and selling securities, such as stocks and bonds on stock exchanges like the BSE/NSE to take advantage of fluctuations in the market. Since trading involves high risk, it may result in higher returns or hefty losses. Also, in Trading, it is always recommended for investors to not time the market, take calculated risks that match risk appetite, balance long and short-term positions, plan for stop loss to minimize losses, and do proper research before investing in one or more instruments across companies. So, if your financial situation allows you to take on calculated risks, &nbsp;this is a good wealth-creation choice for you.</p>



<h3 class="wp-block-heading"><strong>What is Investing?</strong></h3>



<p>If you are someone who is willing to take a bit of risk and is patient with your vision set on the farther future, investing is the best middle path that offers the best of both worlds, enabling you to accumulate much greater financial gains over a relatively longer period and in a relatively safe way. One of the classic ways of investing could be via monthly SIPs on a portfolio of mutual funds (equity, debt, hybrid, alternatives) over long periods with annual adjustments on allocations done based on risk appetite, returns and life cycle factor. By investing in small amounts every month, the investor is averaging out day to day market fluctuations.</p>



<p><strong>Note: </strong>The key difference between trading and investing lies primarily with the end goals whether it is short-term wealth creation leveraging market movements OR growing wealth for long-term needs.</p>



<h2 class="wp-block-heading"><strong>Can You Get Rich Just by Saving a Lot?</strong></h2>



<p>Short Answer: NO.</p>



<p>While you <em>do </em>need to put aside a certain portion of your paycheck for future financial security into liquid short-term savings instruments, it is extremely challenging to get rich just by this approach.</p>



<p>As we have already explained, savings accounts or fixed deposits typically do not generate high returns because they are a so-called “safe” option, and their interest rates are usually minimal. </p>



<p><strong>Note: </strong>There’s always a direct correlation between the level of financial risk you’re willing to take on and how much you profit from it.</p>



<p>Besides, you also need to account for inflation in order to ensure you’re not getting the shorter end of the stick with savings.</p>



<p>Let’s assume you have Rs. 100 in hand, and the inflation each year is 4%. In other words, the value of goods and services will also increase by 4%.</p>



<p>So, after one year, the purchasing power of Rs.100 will drop to Rs. 96, meaning that even if you have Rs. 100 in hand, you can only buy items worth Rs. 96.</p>



<p>Extrapolating this over, say, a five-year period, the “value” of Rs. 100 will drop to Rs. 81.</p>



<p>Thus, even if you do save Rs. 100, it won’t do much if the rate of return does not keep up with the inflation.</p>



<h2 class="wp-block-heading"><strong>What Are the Advantages and Disadvantages of Trading?</strong></h2>



<p>Trading requires you to be proactive about which stocks/bonds to trade, and you also need to be wee informed to profit from the market’s volatility. Below are some risks and benefits in creating wealth through trading.</p>



<h3 class="wp-block-heading"><strong>The Benefits Of Trading</strong></h3>



<ul>
<li><strong>Quick Gains: </strong>Trading allows individuals to profit from short-term fluctuations, and those who understand the market dynamics well can make good returns in a much shorter time frame.&nbsp;</li>



<li><strong>Flexibility &amp; Liquidity: </strong>One of the biggest benefits of trading is that your money isn’t going to be tied up to specific investments once you choose them. You can make timely changes to your portfolio based on ‌current market conditions or exit if needed for any personal reasons.</li>



<li><strong>Diversification: </strong>You can spread out financial risk by diversifying your assets into stocks, bonds, commodities, derivatives, and whatnot! And if you know what you’re doing, this may help protect your portfolio in a volatile market.</li>
</ul>



<h3 class="wp-block-heading"><strong>The Problems Of Trading</strong></h3>



<ul>
<li><strong>Transaction Costs: </strong>Short-term trading can have additional fees, such as brokerage fees or commissions, associated with them, meaning the total can add up every time you buy/sell equity.</li>



<li><strong>High Risk: </strong>Trading is NOT for the risk averse. Prices can quickly go up or down at any point in time. If you aren’t ready to cope with such an ever-changing market climate, you can lose out not only on the expected returns but also on the principal amount.</li>



<li><strong>Emotional Distress: </strong>Having to constantly navigate an evolving market also means trading can be an emotional rollercoaster for many people. Negative emotions like anxiety, panic, or greed that are quick to creep in may also impact one’s decision-making ability and affect how much they earn.&nbsp;</li>
</ul>



<h2 class="wp-block-heading"><strong>Now, Let’s Talk About Investing…</strong></h2>



<p>If trading requires you to be highly active and manage securities often, then investing affords you the “luxury” of putting your money into specific assets and assessing how they perform over a longer period.</p>



<p>But what are the pros and cons of doing so?</p>



<h3 class="wp-block-heading"><strong>What are the Upsides To Investing?</strong></h3>



<ul>
<li><strong>Long-Term Convenience: </strong>You don’t need a huge amount of money to begin with. Besides, there is no right or wrong time to invest, so you can still maximise your returns without constantly monitoring the market every second.</li>



<li><strong>Income Generation: </strong>Some investments, such as dividend-paying stocks, can provide you with additional streams of income without much effort on your part.</li>



<li><strong>Reduces Risk</strong>: When you invest over a longer period of time, the volatility of the market no longer threatens your money in the same way as it does with trading. Historically, the stock market has constantly beaten the rate of inflation, which also ensures your money actually grows in value.</li>



<li><strong>Tax Benefits</strong>: Long-term investments typically come with some tax relief. So, no matter which tax slab you fall under, you can always avail yourself some tax-saving benefits as Long Term Capital Gains (LTCG) are taxed lower than Short Term Capital Gains (STCG).</li>
</ul>



<h3 class="wp-block-heading"><strong>What Are The Downsides To Investing?</strong></h3>



<ul>
<li><strong>No Guaranteed Returns: </strong>While the correct investment strategies can be rewarding, there’s no such thing as a “guaranteed return” if you invest. Depending on the underlying investments, market volatility, and other economic factors, your investment portfolio performance would vary.</li>



<li><strong>Liquidity: </strong>Ideally, with most investment plans, you are required to park your money over a longer period of time to see any significant gains. And that means you need patience and perseverance. You can’t expect quick returns and can’t afford to get perturbed by fluctuations in the market. The further you invest and allow your money to grow beyond your lock-in period, the higher your long-term financial gains. A good investor must be able to ebb over stormy seas and see the bigger picture.</li>
</ul>



<h2 class="wp-block-heading"><strong>Choose The Right Strategy To Ensure Your Financial Success!</strong></h2>



<p>Saving, trading, and investing are different concepts — all of which have a lot to offer. Whether or not each aligns with your future financial goals depends entirely on how you choose to utilise them.</p>



<p>While saving is an obvious necessity, investing and trading are choices that will define how well you make your money “work for you”.</p>



<p>Investing offers a good opportunity to earn relatively stable long term financial growth (of course, with <em>some </em>risks), and hence recommended for everyone to incorporate it in their financial wealth growth plan.</p>



<p>Trading however can be an option you can take on <em>ONLY </em>if you can afford to set aside some money with your eyes wide open to the fact that you could quite easily win big or lose big, as well. Naturally, trading is also more volatile and risky choice compared to investing. But the gains can also be substantially higher if you can manage to make the right decisions at the right time (that’s possible with some trading knowledge under your belt).</p>



<p><strong>Note: </strong>Never take these decisions lightly. Weigh all your options carefully and select options that are best suited for your current age, future wealth creation plans, and your risk appetite.</p>



<p>You may even consider talking to a professional for a better, in-depth understanding of <strong>where to invest money to get good returns</strong>.</p>



<p>If you’re looking for more interesting investment updates, stay tuned for our upcoming blog.</p>


Saving, Trading, Or Investing — Which Is Right for You?


<div class="wp-block-ht-block-toc  is-style-outline htoc htoc--position-wide toc-list-style-bulleted" data-htoc-state="expanded"><span class="htoc__title"><span class="ht_toc_title">Table of Contents</span><span class="htoc__toggle"><svg xmlns="http://www.w3.org/2000/svg" width="16" height="16"><g fill="#444"><path d="M15 7H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1z"></path><path d="M15 1H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1zM15 13H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1z"></path></g></svg></span></span><div class="htoc__itemswrap"><ul class="ht_toc_list"><li class=""><a href="#htoc-how-do-etfs-differ-from-mutual-funds">How Do ETFs Differ From Mutual Funds?</a><ul class="ht_toc_child_list"><li class=""><a href="#htoc-1-trading-flexibility">1. Trading Flexibility</a></li><li class=""><a href="#htoc-2-initial-investments">2. Initial Investments</a></li><li class=""><a href="#htoc-3-fees">3. Fees</a></li><li class=""><a href="#htoc-4-transparency">4. Transparency</a></li></ul></li><li class=""><a href="#htoc-are-etfs-a-better-investment-choice-than-mutual-funds">Are ETFs A Better Investment Choice Than Mutual Funds?</a></li><li class=""><a href="#htoc-what-works-in-favour-of-etfs">What Works In Favour Of ETFs</a><ul class="ht_toc_child_list"><li class=""><a href="#htoc-1-flexibility-in-trading">1. Flexibility In Trading</a></li><li class=""><a href="#htoc-2-lower-costs">2. Lower Costs</a></li><li class=""><a href="#htoc-3-diversification-of-your-portfolio">3. Diversification Of Your Portfolio</a></li><li class=""><a href="#htoc-4-flexible-dividend-payouts">4. Flexible Dividend Payouts</a></li></ul></li><li class=""><a href="#htoc-are-there-any-downsides-to-opting-for-etfs-over-mutual-funds">Are There Any Downsides To Opting For ETFs Over Mutual Funds?</a><ul class="ht_toc_child_list"><li class=""><a href="#htoc-1-trading-costs">1. Trading Costs</a></li><li class=""><a href="#htoc-2-premiums-or-discounts">2. Premiums Or Discounts</a></li><li class=""><a href="#htoc-3-complexity">3. Complexity</a></li><li class=""><a href="#htoc-4-dividend-payout-delay">4. Dividend Payout Delay</a></li></ul></li><li class=""><a href="#htoc-who-should-invest-in-etfs">Who Should Invest In ETFs?</a><ul class="ht_toc_child_list"><li class=""><a href="#htoc-1-active-traders">1. Active Traders</a></li><li class=""><a href="#htoc-2-investors-looking-for-flexibility">2. Investors Looking For Flexibility</a></li><li class=""><a href="#htoc-3-niche-investors">3. Niche Investors</a></li></ul></li><li class=""><a href="#htoc-where-should-i-invest-in-etfs">Where Should I Invest In ETFs?</a><ul class="ht_toc_child_list"><li class=""><a href="#htoc-1-stock-exchange">1. Stock Exchange</a></li><li class=""><a href="#htoc-2-online-brokers">2. Online Brokers</a></li><li class=""><a href="#htoc-3-direct-investment-plans">3. Direct Investment Plans</a></li></ul></li><li class=""><a href="#htoc-the-final-takeaway">The Final Takeaway</a></li></ul></div></div>



<p>In short, an ETF or Exchange-Traded Fund is an investment fund that combines the best features of mutual funds with the simplistic idea of exchanging equities on the stock market.</p>



<p><strong>Picture this: </strong>You are in a marketplace where, instead of individual stocks or commodities, entire portfolios (or their shares) are packaged into a single, tradable security.</p>



<p>Voila! That’s an ETF.</p>



<p>ETFs offer their investors the convenience of buying and selling a whole “basket” of assets of a certain category, which may include equity ETF, bonds ETF, or commodity ETF, in one single transaction — just like you would with individual shares.</p>



<p>Since these funds track market indexes like the Nifty 50 or BSE Sensex, they also reflect the market’s true status.</p>



<p>Now, one question arises — “<strong>Where should I invest my money?</strong>”</p>



<p>Traditionally, a lot of investors in India are usually partial to investment options such as Fixed Deposits (FDs), Gold, Savings Accounts, and physical Real Estate. But with India’s recent education and investment boom, investors’ participation in other investment categories is growing, especially in equities, listed bonds, mutual funds, and <strong>alternative investment opportunities</strong>, like unlisted bonds, asset leasing, real estate debt, venture debt, etc.</p>



<p>To evaluate whether&nbsp; ETFs and mutual funds are the <strong>best investment options</strong>, you must first understand how they can impact your financial portfolio in the long term.</p>



<h2 class="wp-block-heading" id="htoc-how-do-etfs-differ-from-mutual-funds"><strong>How Do ETFs Differ From Mutual Funds?</strong></h2>



<p>While ETFs and mutual funds share similar traits, i.e., distributing investors’ money to purchase a diverse range of securities, there are still many things that set them apart. They are as follows:</p>



<h3 class="wp-block-heading" id="htoc-1-trading-flexibility"><strong>Trading Flexibility</strong></h3>



<p>ETFs are traded throughout the day, much like individual stocks, with their prices fluctuating based on supply and demand. You can buy or sell ETFs anytime within trading hours at the market price.</p>



<p>But mutual funds are only traded once a day <em>after </em>the market closes. The NAV (Net Asset Value), calculated at the end of each trading day, determines the price at which you can buy or sell mutual fund units.</p>



<h3 class="wp-block-heading" id="htoc-2-initial-investments"><strong>Initial Investments</strong></h3>



<p>Generally, ETFs have lower initial investment requirements than mutual funds. You can simply buy an ETF for the cost of one share, which could be significantly lower than the minimum investment required for any mutual fund. That makes ETFs a more manageable <strong>investment option</strong>, especially for novice investors or those with limited capital.</p>



<h3 class="wp-block-heading" id="htoc-3-fees"><strong>Fees</strong></h3>



<p>“Active” funds, like mutual funds, have a fund manager deciding what securities to buy or sell to outperform the market. But passive funds, such as ETFs, simply track a specific index, sector, or commodity. Some ETFs are, however, actively managed, too, but they are rare.</p>



<p>As a result, typically, ETFs have lower expense ratios – or how much you have to pay over the course of a year to own the fund – compared to mutual funds. However, you may have to pay a brokerage fee every time you trade an ETF — just like you would with a stock. On the other hand, mutual funds, particularly those that are actively managed, tend to have higher expense ratios.</p>



<h3 class="wp-block-heading" id="htoc-4-transparency"><strong>Transparency</strong></h3>



<p>When it comes to transparency, ETFs score higher. They disclose their holdings daily, allowing investors to know exactly what assets they own at any given time. But that’s not the case with mutual funds, which usually disclose their holdings once every four or six months.</p>



<h2 class="wp-block-heading" id="htoc-are-etfs-a-better-investment-choice-than-mutual-funds"><strong>Are ETFs A Better Investment Choice Than Mutual Funds?</strong></h2>



<p>Not necessarily!</p>



<p>While both ETFs and mutual funds offer ways to diversify your portfolio, there are certain advantages and disadvantages to both categories.</p>



<p>Let’s elaborate…</p>



<h2 class="wp-block-heading" id="htoc-what-works-in-favour-of-etfs"><strong>What Works In Favour Of ETFs</strong></h2>



<h3 class="wp-block-heading" id="htoc-1-flexibility-in-trading"><strong>Flexibility In Trading</strong></h3>



<p>One of the most attractive features of ETFs is that you can trade them like regular stocks. You can buy or sell ETFs anytime at fluctuating market prices.</p>



<p>Mutual funds, on the other hand, can only be traded once a day – after the market has closed.</p>



<h3 class="wp-block-heading" id="htoc-2-lower-costs"><strong>Lower Costs</strong></h3>



<p>In the world of investments, every rupee counts!</p>



<p>And as we already explained, ETFs usually have lower expense ratios. In other words, it will likely be cheaper for you to own ETFs than mutual funds. That can significantly impact your portfolio’s long-term growth as these savings can also compound over time.</p>



<h3 class="wp-block-heading" id="htoc-3-diversification-of-your-portfolio"><strong>Diversification Of Your Portfolio</strong></h3>



<p>When it comes to investing, no one can see impressive results without diversifying their portfolio. And this is where ETFs become particularly handy within an asset class, say equity or bonds.</p>



<p>Let’s say that the ETF you have purchased is tracking the Nifty 50 index, which tracks the performance of the top 50 Indian companies listed on the NSE.</p>



<p>Then, instead of building a portfolio on your own by purchasing stocks from, let’s say, Airtel and a few other companies to diversify, you can now spread out your investments more easily — as well as the accompanying risks because you would now own chunks of all the top names in the banking, technology, or energy sectors in India.</p>



<p>So, from tracking a specific industry, commodity, or broad-market index to giving exposure to nearly any niche market around the globe, ETFs can help minimize risk and increase the net returns of your portfolio in comparison to building an equity or bond portfolio with different companies.&nbsp;</p>



<h3 class="wp-block-heading" id="htoc-4-flexible-dividend-payouts"><strong>Flexible Dividend Payouts</strong></h3>



<p>With ETFs, you can either reinvest the dividends you receive or cash them out directly. This flexibility can make all the difference, depending on your financial situation and goals.</p>



<h2 class="wp-block-heading" id="htoc-are-there-any-downsides-to-opting-for-etfs-over-mutual-funds"><strong>Are There Any Downsides To Opting For ETFs Over Mutual Funds?</strong></h2>



<p>While ETFs have been garnering a lot of attention due to their potential benefits, every coin has two sides. So, before you rush to invest your money in ETFs, you must be aware of what the downsides are.</p>



<h3 class="wp-block-heading" id="htoc-1-trading-costs"><strong>Trading Costs</strong></h3>



<p>Although ETFs typically have lower expense ratios than mutual funds, you’ll likely incur a brokerage charge every time you trade an ETF. These costs can add up, especially if you’re an active trader or want to invest small amounts regularly.</p>



<h3 class="wp-block-heading" id="htoc-2-premiums-or-discounts"><strong>Premiums Or Discounts</strong></h3>



<p>It’s possible that you would have to buy an ETF for more than its actual worth or sell it for less than its true value. This usually happens due to supply-demand dynamics, especially with less liquid or thinly traded ETFs.</p>



<h3 class="wp-block-heading" id="htoc-3-complexity"><strong>Complexity</strong></h3>



<p>Some types of ETFs, like leveraged or inverse ETFs, can be complex and carry additional risks. The former is designed to provide a significantly higher yield than its regular counterpart, whereas the latter ‌is meant for short-term trading.</p>



<p>Nonetheless, because of these facets, such ETFs can also be much riskier than traditional ETFs.</p>



<h3 class="wp-block-heading" id="htoc-4-dividend-payout-delay"><strong>Dividend Payout Delay</strong></h3>



<p>Although investors do earn dividends from ETFs, there can be a delay in passing these gains on to them. This lag can have an impact ‌‌on total returns and may cause some issues, particularly for those who view these payouts as additional income.</p>



<h2 class="wp-block-heading" id="htoc-who-should-invest-in-etfs"><strong>Who Should Invest In ETFs?</strong></h2>



<p>Are you unsure about whether you should include ETFs as part of your investment strategy? If you fall under any of the following categories, it may be a wise idea to add ETFs to your portfolio.</p>



<h3 class="wp-block-heading" id="htoc-1-active-traders"><strong>Active Traders</strong></h3>



<p>For those who prefer to buy and sell securities throughout the day, ETFs can be a good choice. The prices fluctuate from time to time, allowing investors to take advantage of intra-day price movements.</p>



<p><strong>Note:</strong> Even though you might find ETFs’ typically lower expense ratios appealing, do account for applicable brokerage fees (when you buy or sell).</p>



<h3 class="wp-block-heading" id="htoc-2-investors-looking-for-flexibility"><strong>Investors Looking For Flexibility</strong></h3>



<p>If you want flexibility and more control over your investments, then ETFs can offer a distinct advantage. You can use advanced trading techniques like short selling or buying on margin to maximise your profits.</p>



<h3 class="wp-block-heading" id="htoc-3-niche-investors"><strong>Niche Investors</strong></h3>



<p>If you’re looking to invest in a specific sector, commodity, or market, ETFs can offer targeted exposure (and less risk) that might be harder to achieve with mutual funds. ETFs can track everything from gold to technology stocks, so don’t let most niches scare you away from investing.</p>



<p><em>While these investor profiles may benefit the most from investing in ETFs, it doesn&#8217;t mean others won&#8217;t. Investing in ETFs, mutual funds, or a combination of both should be guided by your financial goals, risk tolerance, investment horizon, and personal preferences.</em></p>



<h2 class="wp-block-heading" id="htoc-where-should-i-invest-in-etfs"><strong>Where Should I Invest In ETFs?</strong></h2>



<p>Here are some general avenues through which you can invest in ETFs, keeping your convenience and preferences in mind.</p>



<h3 class="wp-block-heading" id="htoc-1-stock-exchange"><strong>Stock Exchange</strong></h3>



<p>You can buy or sell ETFs during trading hours, and their prices fluctuate throughout the day based on supply and demand. You&#8217;ll need a Demat and trading account to invest in ETFs through a stock exchange.</p>



<h3 class="wp-block-heading" id="htoc-2-online-brokers"><strong>Online Brokers</strong></h3>



<p>Many investors prefer using online brokers to buy and sell ETFs. Online brokers offer convenient and easy-to-use platforms for trading; they also frequently provide research tools, educational materials, and customer support.</p>



<h3 class="wp-block-heading" id="htoc-3-direct-investment-plans"><strong>Direct Investment Plans</strong></h3>



<p>Some ETF providers offer direct investment plans that allow you to invest in ETFs on a systematic, scheduled basis. This can be an excellent option for investors looking at a more passive, long-term investment strategy.</p>



<h2 class="wp-block-heading" id="htoc-the-final-takeaway"><strong>The Final Takeaway</strong></h2>



<p>The choice between ETFs and mutual funds shouldn’t be an “either-or” decision. You need to understand what suits you best, depending on things like your current financial strengths and your risk “appetite.”</p>



<p>But always remember that a well-diversified portfolio is key to financial success, so be wise and do your research before you purchase either option.</p>



<p>If you’re interested in more <strong>investment opportunities in India</strong>, keep following our <a href="https://www.jiraaf.com/blogs">blog</a> for regular updates.</p>


ETFs Vs Mutual Funds? Which Is Better For You And Why?


<p>While the rules of investing can differ based on individual circumstances, the enlisted principles are universally relevant and beneficial for all investors. These rules serve as a foundation for healthy investment practices.&nbsp;</p>



<h2 class="wp-block-heading"><strong>What are these 5 Rules of Investing?</strong></h2>



<p> Let’s find out now.&nbsp;</p>



<p><strong>Start Early</strong> – Investment is not subject to age. Starting investments as soon as you start making money, no matter how little, the key is to achieve long-term financial success.</p>



<p></p>



<p><strong>Give Your Money Time To Grow</strong>&#8211; While it is extremely tempting to withdraw accumulated cash from your investment portfolio, resist that need for immediate gratification. Allow the investments to weather market ups and downs, average out the losses in the long term, and benefit from the power of compounding. </p>



<p></p>



<p><strong>Diversify Adequately </strong>– Diversify your capital in different asset classes, sectors, and more to minimize your exposure to risk related to a single investment and maximize your returns.</p>



<p></p>



<p><strong>Research On Your Own</strong> – Well, you research excessively while buying a phone. So why not while parking your hard-earned money when investing? Refer to a reliable source and understand at least the basics before choosing your investment.</p>



<p></p>



<p><strong>Monitor, Correct, Re-allocate</strong> – Remember, successful investing is about being proactive, adaptable, and informed to keep your portfolio aligned with your goals and risk tolerance.</p>



<p></p>



<p>Even after understanding all the above, most investors make an unforgiving mistake.&nbsp;</p>



<h2 class="wp-block-heading"><strong>What is the Biggest Investing Mistake?</strong></h2>



<p><em>Inconsistency with Investments</em></p>



<p>The biggest investing mistake that an investor can do is not being consistent with investments. Failing to maintain consistency acts like a snowball crashing all the benefits of compounded investments. Thus, investing requires patience and discipline to reap the rewards of long term-investing.</p>



<p>Build a secure financial future for yourself and your loved ones.  Want to start investing but are bombarded with hearsay? Demystify 10 common myths of investing.</p>


5 Rules of Investing – 2-Minute Guide


<p>Are you looking for a fixed-income investment that provides returns higher than Fixed Deposits, offers guaranteed returns with zero risk, and has short tenure?&nbsp;</p>



<p>Look no further and explore this attractive money market instrument called Treasury Bills issued by the Government of India.&nbsp;</p>



<ul>
<li>What are Treasury Bills?&nbsp;</li>



<li>How much is the minimum investment?&nbsp;</li>



<li>How to invest in Treasury Bills?&nbsp;</li>
</ul>



<p>Read this blog to find answers to all your questions on Treasury Bills.</p>



<p></p>



<h2 class="wp-block-heading"><strong>Who issues Treasury Bills?</strong></h2>



<p>The government of a country issues Treasury Bills</p>



<p></p>



<h2 class="wp-block-heading"><strong>What are Treasury Bills (<strong>T-Bills</strong>)?</strong></h2>



<p>Let’s understand this in the simplest way possible!</p>



<p>The government undertakes many projects for building the nation.</p>



<p>When the government has to fund projects to construct highways, repay debts, build defense systems, or execute social programs, it borrows money from investors by issuing Treasury bills. Essentially, Treasury bills are short-term loans to the government, with maturities ranging from a few days to a few months but usually less than a year. In exchange for the money borrowed, the government pays a small fee to the investors which can be called the return. Overall, Treasury bills are a way for the government to obtain short-term financing while providing investors with a safe and reliable investment option.</p>



<p></p>



<h2 class="wp-block-heading"><strong>Why does the government issue Treasury Bills?</strong></h2>



<p>That’s a great question!</p>



<p>While government collects taxes from the public to undertake developmental projects, all the taxes collected by the government as revenue may not be adequate to cover all the government’s expenses.&nbsp;</p>



<p>Additionally, the government is responsible to execute the operations without depleting the cash reserves below a defined threshold limit. For this reason, the government depends on issuing Treasury Bills to raise short-term capital without disturbing cash adequacy.</p>



<p>Another reason why the government may issue Treasury Bills is to monitor the interest rates in the economy. By competing with other borrowers in the market, the government can help in checking the interest rates and avoid volatility in the financial markets.</p>



<p></p>



<h2 class="wp-block-heading"><strong>Are Treasury Bills Safe Investments?</strong></h2>



<p>Yes. Treasury Bills are safe investments because they are backed by the credit and security of the government. Even during an economic downturn, the Central government is bound to repay the investor fully. Moreover, the fixed and short tenure of Treasury Bills makes them a predictable form of investment to get returns in a short time frame.&nbsp;&nbsp;</p>



<p>T-Bills are nothing but G-Secs with a maturity of less than a year.</p>



<p></p>



<h2 class="wp-block-heading"><strong>What are the types of Treasury Bills?</strong></h2>



<p>Treasury Bills are differentiated based on their tenure of maturity. The tenure of T-Bills is less than one year.&nbsp;</p>



<p>The 3 types of T-Bills are –</p>



<p>91 days T-Bills</p>



<p>182 days T-Bills</p>



<p>364 days T-Bills</p>



<p></p>



<h2 class="wp-block-heading"><strong>What is the minimum investment required to buy Treasury Bills?</strong></h2>



<p>The RBI has notified that the minimum investment for T-Bills is Rs 10,000. If someone is interested to invest more, T-Bills can be bought in multiples of Rs 10,000.</p>



<p></p>



<h2 class="wp-block-heading"><strong>How much is the interest rate on Treasury Bills in India? </strong></h2>



<p>Treasury bills are zero-coupon debt instruments. But an investor earns gains on the Treasury Bills by buying them at a discounted rate and receiving face value upon maturity.</p>



<p></p>



<h2 class="wp-block-heading"><strong>How to buy or invest in Treasury Bills in India?</strong></h2>



<p>As marketable securities, Treasury Bills are bought and sold in the secondary market. One can also buy Treasury Bills from one of the brokerage houses of their choice. Jiraaf as a platform also sells Treasury Bills to its customers.</p>



<p>Once T-Bills are purchased, the units are credited to your demat account, and all related repayments will be directly credited to your bank account tied to your demat account on the maturity date.</p>



<p></p>



<h2 class="wp-block-heading"><strong>What is the tax treatment on Treasury Bills in India?</strong></h2>



<p>When it comes to treasury bills, the income generated attracts short-term capital gains tax, with the tax rate subject to the investor&#8217;s income tax slab. A key benefit of government securities (Treasury Bills in this case) is that they are not subject to tax deducted at source (TDS). This means that TDS is not deducted from the interest payments made to investors.</p>



<p></p>



<h2 class="wp-block-heading"><strong>What are the benefits of investing in Treasury Bills?</strong></h2>



<p><strong>Low/No risk</strong>: The issuer of Treasury-Bills is RBI. The risk associated with Treasury Bills investment is almost negligible with the complete security of the government.</p>



<p><strong>Liquidity:</strong>&nbsp;The maturity period of the Treasury Bill is less than 364 days. The short tenure of the Treasury Bills makes them a predictable and highly liquid investment option.</p>



<p></p>



<h2 class="wp-block-heading"><strong>Better Returns than Bank Fixed Deposits:&nbsp;</strong></h2>



<p>As of March 2023, T-bills maturing in six months have an annualized yield of 7.23%, compared to a 6-month FD interest rate closer to 5.75%.</p>



<p>Reserve Bank of India (RBI published rates)</p>



<p></p>



<h2 class="wp-block-heading"><strong>Tradable in Secondary Market:&nbsp;</strong></h2>



<p>Treasury Bills can be sold by the investor in the secondary market and converted into cash before their maturity.</p>



<p></p>



<h2 class="wp-block-heading"><strong>How can you buy Treasury Bills on the Jiraaf Platform?</strong></h2>



<p>Investing in Treasury Bills on Jiraaf is a simple process.&nbsp;</p>



<ul>
<li>Sign up on the Jiraaf platform.&nbsp;</li>
</ul>



<ul>
<li>Complete your KYC</li>
</ul>



<ul>
<li>Check the &#8216;Opportunities&#8217; section for live Treasury Bills deals.&nbsp;</li>
</ul>



<ul>
<li>Invest and submit.&nbsp;</li>
</ul>


Beginner’s Guide to Treasury Bills


<p>Investing for retirement is a crucial aspect of financial planning, and it is never too early or too late to start. Whether you are in your 20s or 50s, investing for retirement should be a priority. To maintain a desired lifestyle after you stop working and to be financially secure when you are old, planning and investing for your retirement from early on is essential.</p>



<p>Retirement can span many years, and depending only on a basic pension will not be sufficient to cover your expenses. To enjoy a relaxed retirement, it is important to be prepared financially.</p>



<p>But while thinking about financial preparedness for retirement, many questions haunt the investor. Questions like &#8211; When should one begin to plan for building a retirement corpus? How much money is required for a comfortable retirement? And what measures can be taken to guarantee that there is enough money for retirement?</p>



<p>To find guidance for these questions and to set a plan in motion for accumulating your retirement corpus, read this blog for some insightful strategies on retirement planning.</p>



<p>Let us begin with an understanding of&nbsp;<em><strong>how to calculate the estimated retirement corpus.</strong></em></p>



<p>It is often recommended that individuals should plan on having at least <strong>70% of their last drawn pre-retirement income</strong> to cover their expenses during their retirement.&nbsp;</p>



<h2 class="wp-block-heading"><strong>Why 70%?</strong></h2>



<p>Because as one gets old, the overall expenses relating to EMI payments, office commute, lunches with colleagues, and formal wardrobe might reduce but expenses related to health care, hospital bills, leisure, and travel will be on the rise. Such bills usually are substantial and will require one to be prepared in advance.</p>



<p>However, to be accurate, and consider inflation and other factors, you can leverage&nbsp;<a href="https://www.moneycontrol.com/personal-finance/tools/retirement-planning-calculator.html" target="_blank" rel="noreferrer noopener">this calculator</a>&nbsp;(Calculator Source: Moneycontrol) to get an estimate of the retirement corpus.&nbsp;</p>



<p>The next concern that arises is&nbsp;<em><strong>when should one start investing to build the retirement corpus.</strong></em></p>



<p>There is no right or wrong answer to this. But the earlier you start, the more time you have to save and invest, and the more potential your money can grow. By investing early, you can also afford to take more risks with your investments, which can lead to higher returns in the long run.</p>



<p>Ideally, you should start with retirement planning from the time you start earning a stable income in your 20s.&nbsp;</p>



<p>Now, when a&nbsp;<em><strong>person in their 20s</strong></em>&nbsp;thinks of investing for his retirement,&nbsp;<em><strong>what kind of investments should be picked?</strong></em></p>



<p>Assuming that individuals in their 20s are amateur investors, with fewer financial responsibilities, they could consider investing in funds like Multicap or Large cap Mutual Funds via a monthly Systematic Investment Plan (SIP).</p>



<p>Multi-cap funds are mutual funds that are required by SEBI to invest at least 75% of their total assets in equity and equity-related instruments at any given point in time. Out of this 75%, a minimum of 25% must be invested in large-cap stocks, another 25% in mid-cap stocks, and the remaining 25% in small-cap stocks. Large-cap companies are the&nbsp;<em>top 100 publicly listed</em>&nbsp;firms in India with stable growth rates and less sensitivity to market volatility.</p>



<p>Thus, for new investors multi-cap and large-cap funds will be a great way to start building their portfolio given the diversification these funds provide for relatively competitive returns in the long term.</p>



<h2 class="wp-block-heading"><strong>Step up as you grow</strong></h2>



<p>As individuals grow older and there is a growth in their earnings, it is important to consider stepping up their investments to help achieve their long-term financial goals. Step-up is nothing but increasing the amount of investment in proportion to one’s income. Stepping up can also mean increasing the percentage of saving every month, diversifying the portfolio, potentially taking on higher-risk investments to achieve higher returns, and exploring alternative fixed-income investments that provide very competitive returns and carry lower risk compared to equity products.&nbsp;</p>



<p>However, as individuals move closer to the target retirement age, rebalancing their investment portfolio annually in terms of portfolio allocation (more allocation to low-risk investments) to reduce risk is required as one prepares themselves to begin withdrawing funds regularly.&nbsp;</p>



<p><em><strong>Retirement does not always mean taking little-to-no risk.</strong></em></p>



<p>The popular advice with regards to a retired person managing his or her investment portfolio is to ‘take it easy with no risk’. But that is not truly the case for everyone. It depends on factors like monthly spending needs, sources of income, risk appetite, lifestyle, and size of one’s investment portfolio.</p>



<p>For a person who has already retired and has a comfortable amount of funds, alternative-fixed income investments can be a great option to explore. These are non-traditional investments that provide fixed returns, are predictable, and not related to the market. Notably, alternative-fixed income investments can be short-tenured too with risk typically lower than equity but higher than Fixed Deposits.</p>



<p>With a proper understanding of the investment opportunities and risks involved, one can earn timely returns (above inflation rates) by investing in corporate debts, venture debts, asset-backed leasing, and invoice discounting from a good, trusted platform.&nbsp;</p>



<h2 class="wp-block-heading"><strong>Jiraaf&#8217;s Alternative-Fixed Income Investment Opportunities</strong></h2>



<p>Jiraaf offers investment opportunities for those seeking higher returns on their funds compared to traditional bank deposits. Alternative fixed-income investments available on Jiraaf offer better returns than bank rates (8% to 12% annual returns), while also being less volatile and less risky than equity products. These investment options have tenure generally between 3 months to 36 months and allow investors to diversify their portfolios beyond traditional stocks, mutual funds, bonds, real estate, and gold.</p>



<h2 class="wp-block-heading"><strong>Conclusion</strong></h2>



<p>To sum it up, start your retirement corpus-building process as early as possible. While it is important to achieve other financial goals to be achieved at every phase of life, saving for retirement is safeguarding for retirement.</p>



<p>Investing for retirement requires a long-term perspective, consistency, regular monitoring, correction, and reallocation of the portfolio. With patience, discipline, and a solid investment strategy, investors can work towards achieving their retirement goals and enjoying a comfortable retirement.</p>


Retire in Comfort: A Beginner’s Guide to Investing for Retirement


<div class="wp-block-ht-block-toc  is-style-outline htoc htoc--position-wide toc-list-style-plain" data-htoc-state="expanded"><span class="htoc__title"><span class="ht_toc_title"><strong>Table of Contents</strong></span><span class="htoc__toggle"><svg xmlns="http://www.w3.org/2000/svg" width="16" height="16"><g fill="#444"><path d="M15 7H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1z"></path><path d="M15 1H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1zM15 13H1c-.6 0-1 .4-1 1s.4 1 1 1h14c.6 0 1-.4 1-1s-.4-1-1-1z"></path></g></svg></span></span><div class="htoc__itemswrap"><ul class="ht_toc_list"><li class=""><a href="#htoc-1-you-need-a-lot-of-money-to-start-investing">You need a lot of money to start investing&nbsp;</a></li><li class=""><a href="#htoc-2-keeping-money-in-a-bank-is-the-best-way-to-grow-wealth">Keeping money in a bank is the best way to grow wealth</a></li><li class=""><a href="#htoc-3-there-should-be-a-reason-to-invest">There should be a reason to invest</a></li><li class=""><a href="#htoc-4-invest-in-big-and-famous-companies">Invest in big and famous companies</a></li><li class=""><a href="#htoc-5-saving-is-equal-to-investing">Saving is equal to investing</a></li><li class=""><a href="#htoc-6-only-after-a-certain-age-one-should-begin-to-invest">Only after a certain age, one should begin to invest&nbsp;</a></li><li class=""><a href="#htoc-7-follow-the-influencers-and-financial-gurus-to-invest">Follow the influencers and financial gurus to invest</a></li><li class=""><a href="#htoc-8-timing-the-market-is-the-key-to-investment-success">Timing the market is the key to investment success</a></li><li class=""><a href="#htoc-9-investing-is-risky">Investing is risky</a></li><li class=""><a href="#htoc-10-diversification-is-good-so-overdo-it">Diversification is good, so overdo it!</a></li></ul></div></div>



<p>Did you know that 6 out of 10 adults admit that investing is confusing, and they are often surrounded by misconceptions when it comes to choosing an investment product? Most of them want to create long-term wealth but desist from investing and consider it a daunting endeavour.</p>



<p>In this blog, we will explore 10 common myths of investing and separate fact from fiction to help you make informed investment decisions.</p>



<h2 class="wp-block-heading" id="htoc-1-you-need-a-lot-of-money-to-start-investing"><strong>You need a lot of money to start investing&nbsp;</strong></h2>



<p>There is no right time or right amount of money when it comes to investing. Investing regularly over time, even in small amounts can add up and compound to create significant wealth in the future. Remember, it’s never too early or too late to start investing, regardless of the amount of money you have.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-2-keeping-money-in-a-bank-is-the-best-way-to-grow-wealth"><strong>Keeping money in a bank is the best way to grow wealth</strong></h2>



<p>Bank accounts, such as savings and fixed accounts typically offer very low interest rates that struggle to beat the country’s prevailing inflation rate. So, your net return on investment earned by parking money in a bank account is almost negligible. Additionally, if a bank in India fails, a customer can get a guaranteed insured amount only up to Rs 5,00,000, even if the deposit amount is Rs 50,00,000.</p>



<p>While it is safer to keep some money in the bank for short-term needs or as emergency funds, keeping money in the bank for long-term wealth creation is not a good investment strategy.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-3-there-should-be-a-reason-to-invest"><strong>There should be a reason to invest</strong></h2>



<p>While it is true that investing should be done with a purpose in mind, it is still rewarding to consistently invest without tying the process to a reason. In the long run, a portfolio benefitted from compounding can be diverted for achieving life goals or can be utilized in case of emergencies.</p>



<p>However, it is a good strategy to do an annual check-up to reassess your risk appetite, rebalance your portfolio, diversify your investments, and seek expert advice if and where needed.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-4-invest-in-big-and-famous-companies"><strong>Invest in big and famous companies</strong></h2>



<p>Investing in big and famous companies is not necessarily a foolproof investment strategy. Good reputation of a company does not always guarantee good returns or the safety of capital. Large organizations may be less agile giving slower growth, leading to missed opportunities. </p>



<p>Thus, it is necessary to diversify across companies considering financial health, growth potential, management, and industry trends while ensuring that these investments align with the risk appetite and expected returns of the investor’s portfolio.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-5-saving-is-equal-to-investing"><strong>Saving is equal to investing</strong></h2>



<p>Saving refers to setting aside money, and investing refers to putting money into financial assets.</p>



<p>Saving is done to accumulate money. Investing is done to grow money.</p>



<p>While saving is important for meeting short-term financial needs, investing is essential for building long-term wealth.&nbsp;</p>



<p>Having a balanced approach to personal finance that includes both saving and investing in a way that aligns with your financial goals and risk tolerance is the best way to maintain a healthy portfolio.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-6-only-after-a-certain-age-one-should-begin-to-invest"><strong>Only after a certain age, one should begin to invest&nbsp;</strong></h2>



<p>Age doesn’t matter when it comes to investing. In investing, the earlier, the better! Investing early allows one to take more risks and reap the benefits of compounding.</p>



<p></p>



<p>Ideally, as soon as a person begins to earn money, a portion of their income should be allocated towards investments. Starting early gives the advantage of accumulating a good corpus for the future by truly realizing the benefits of compounding.&nbsp;</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-7-follow-the-influencers-and-financial-gurus-to-invest"><strong>Follow the influencers and financial gurus to invest</strong></h2>



<p>Yes, financial influencers on social media channels are telling you about new investment schemes, but how reliable are they?</p>



<p></p>



<p>Most recommendations by the financial influencers are dubious and self-benefitting for affiliate commissions etc. In the wake of pump-and-dump schemes, SEBI has recently issued a public notice advising the masses to refrain from unsolicited paid stock tips and recommendations on Telegram and YouTube, while taking measures to educate the investors.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-8-timing-the-market-is-the-key-to-investment-success"><strong>Timing the market is the key to investment success</strong></h2>



<p>Timing the market refers to shifting the money between investments or withdrawing money from the market based on predictions or market assumptions. Timing the market strategy is extremely risky for an average investor without knowledge of the underlying fundamentals.</p>



<p></p>



<p>This strategy often leads to emotional decision-making, panic selling, and missed opportunities. Experts admit that consistent-correct prediction of the movement of the market has never been possible.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-9-investing-is-risky"><strong>Investing is risky</strong></h2>



<p>Risk is inherent to investing. The degree of risk depends on various factors such as asset category, the underlying asset, investment structure, tenure, sector, and external factors.</p>



<ul>
<li>Investing in futures and options is riskier than investing in equities.</li>



<li>Investing in equities is riskier than investing in debt securities.</li>



<li>Investing in a single stock is riskier than investing in a diversified portfolio of stocks.</li>
</ul>



<p>While investing does carry some level of risk, labelling investing as risky and refraining from it invalidates long-term wealth creation. Investors should also do their due diligence before investing, such as researching the company or fund they are considering and understanding the potential risks involved.</p>



<p></p>



<h2 class="wp-block-heading" id="htoc-10-diversification-is-good-so-overdo-it"><strong>Diversification is good, so overdo it!</strong></h2>



<p>While diversification of the portfolio is recommended to distribute the risk across various asset classes and investment opportunities, ‘over-diversifying’ the capital results in diluted returns and increased transaction costs. The key is to find the right balance between diversification and concentration. </p>



<p>Diversification of a portfolio amongst liquid assets, equities, debt instruments, short-term and long-term investments, real estate, alternative fixed income instruments, gold, etc., should be done based on tenure, risk appetite, personal circumstances, and financial goals of an individual. Hence there is no one-fits-all rule for diversification.</p>



<p></p>



<p>With 10 common myths about investing shattered, you can start your journey to long-term wealth creation with greater confidence and clarity. Happy Investing!</p>


10 Common Investment Myths Debunked


<h2 class="wp-block-heading" id="htoc-are-there-any-alternatives-to-mlds"><strong>Are there any alternatives to MLDs?</strong>&nbsp;</h2>



<p>This article will provide a brief overview of MLDs, their tax implications, and how the Union Budget of 2023-2024 will impact them.&nbsp;</p>



<p>Let us begin by understanding MLDs,</p>



<h2 class="wp-block-heading" id="htoc-what-are-mlds"><strong>What are MLDs?</strong></h2>



<p>The full form of MLD is Market-Linked Debentures. Market-linked debentures or MLDs are debt securities whose returns are based on the indices they are linked with. These indices can be Nifty 50, Sensex, Government securities, gold index funds, etc. Their value is tied to the performance of the indices.&nbsp;</p>



<ul>
<li>MLDs are mostly listed and regulated by SEBI.&nbsp;</li>



<li>The tenure of MLDs typically is between 12-36 months.&nbsp;</li>



<li>Before Jan 2023, the minimum face value of MLDs was Rs 10 lakhs. But an amendment made in Jan 2023 by SEBI brought a reduction of the face value of MLDs to Rs 1 Lakh per unit, making it more affordable amongst the masses. </li>



<li>In general, issuers of MLDs define performance criteria tied to an underlying asset/index in a such way that it provides adequate downsize immunity for smaller market fluctuations thereby giving more protection to the underlying investment. </li>
</ul>



<p> &nbsp;</p>



<h2 class="wp-block-heading" id="htoc-what-has-changed-with-mlds-union-budget-2023-2024"><strong>What has changed with MLDs – Union Budget 2023 &#8211; 2024?</strong>&nbsp;</h2>



<h3 class="wp-block-heading" id="htoc-pre-budget-2023"><strong> Pre Budget 2023</strong></h3>



<p>A listed MLD held for more than 12 months was taxed as LTCG (10%). &nbsp;</p>



<h3 class="wp-block-heading" id="htoc-union-budget-announcement"><strong>Union Budget Announcement</strong>&nbsp;</h3>



<p>In the budget 2023-2024, Finance Minister Nirmala Sitharaman announced that, from 1st April 2023, the tax implication for MLDs will be the same as any other debt. The preferential taxation to these listed debentures will be scrapped.&nbsp;</p>



<p>Also, before the budget 2023-2024, listed debentures available under section 193 of the Income Tax Act were exempted from TDS. However, the amendment has also removed this dispensation.&nbsp;</p>



<h2 class="wp-block-heading" id="htoc-implications-for-investors-post-budget-2023"><strong>Implications for Investors Post Budget 2023</strong></h2>



<p> &nbsp;Return on MLDs will be aggregated with the investor’s total income and taxed as part of overall earnings. In simpler words, MLDs sold any time after 12 months but before maturity will also be subject to the individual’s tax slab rate.&nbsp;</p>



<p>The attraction of TDS on interest income of MLDs along with the jump in tax liability on MLD from 10% to the investor’s applicable slab rate (mostly 30%) is significant. &nbsp;</p>



<p>This amendment in taxation of MLDs starting April 2023 may potentially push away HNIs and UHNIs from choosing MLDs as their preferred tax-saving investment option.&nbsp;</p>



<p></p>



<h3 class="wp-block-heading" id="htoc-if-not-mlds-what-other-options-do-investors-have"><strong>If not MLDs, What other options do investors have? </strong>&nbsp;</h3>



<p>One option is to invest in equity markets but that could be subject to market volatility combined with taking a high risk. Alternatively, they can continue to invest in debt products in the form of alternative-fixed income investments such as invoice discounting, venture capital funding, asset-backed leasing, corporate debts, real estate debt, and more.&nbsp;</p>



<p>Alternative fixed-income investments are predictable, non-market linked, and short-tenured. They are not correlated with stock markets and hence are not susceptible to market volatility. The risks from these products are generally lower than equity and can provide similar to or higher post-tax returns in comparison to MLDs before the amendment.&nbsp;</p>



<p>One such platform curating alternative fixed-income investments is Jiraaf.</p>



<p>To explore more alternative fixed-income investment opportunities, explore  Jiraaf.</p>



<p><strong> </strong>&nbsp;</p>
