Why Tax-Free Bonds Are a Smart Addition to Your Fixed Income Portfolio
When governments need funds to build roads, schools, or public infrastructure, they issue these bonds. Here’s why they could be a perfect fit for your portfolio:
- No Tax on Interest Earned: Unlike fixed deposits or other investments where taxes eat up a part of your returns, the interest from tax-free bonds is completely yours to keep.
- Better Returns After Taxes: Even if the interest rate looks slightly lower than taxable options, the fact that you pay no tax means your net return could be higher!
- Diversification: Already invested in stocks, mutual funds, or FDs? Tax-free bonds add stability to your portfolio as they are low risk and less volatile than stocks.
- Safety First: Issued by government-backed entities, these bonds are among the safest investments, perfect for those who want steady income without stress.
Tax-free bonds provide peace of mind, steady earnings, and a balanced investment approach. If you’re
looking for a tax-efficient and secure way to grow your money, tax-free bonds might just be the answer.
(Contributed by Abhilash S Rana, Relationship Manager, HNI Desk, Hum Fauji Initiatives)
Myth-Busting: Common Myths About Children’s Investments
Sound familiar? The truth is, the earlier you start, the brighter your child’s future will be.
Let’s break some common myths that stop parents from investing smartly!
Myth 1: It’s Too Early to Start
Reality: The earlier you begin, the more your money grows with the magic of compounding. Conversely, the earlier you start, the lesser you have to invest to get the same corpus later.
“We don’t dig the well when we’re thirsty; we prepare well in advance!”
Example: Daughter’s Marriage Goal (Marriage visualised at 25 years)
Myth 2: One needs a lot of money to Start
Reality: Many investment options, like Systematic Investment Plans (SIPs), allow you to invest small, regular amounts, even as low as just a few thousand rupees per month. This makes investing accessible to everyone, regardless of their income level.
The losing equation: Investments = Income – Expenses (Invest what is left after expenses)
The winning equation: Expenses = Income – Investments (Spend what is left after catering for the future)
Mathematically, both equations are same but actually both are different approaches towards our money. Investments should never be the residual amount after taking into account the expenses from the income. Rather investments should be treated as our first expense. Following the 2nd approach will make you a disciplined investor and help you achieve your life goals comfortably.
Myth 3: I Can Handle It Myself
Reality: Would you treat a fever with just a paracetamol when a doctor could diagnose the real issue? Likewise, a financial planner ensures your child’s future is backed by expert guidance.
By busting these myths, you take the first real step towards securing a bright and worry-free future for your child.
(Contributed by Gautam Arora, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)
From Fed Moves to Crude Swings: Tracking Global Trends in Indian Mutual Funds
Ever wondered why your mutual fund returns fluctuate suddenly? The answer often lies in Global economic shifts like shift in interest rate by the US Federal Reserve (the Central Bank of USA, like India’s RBI) and crude oil price swings.
When the US Fed Speaks, the World Listens
The US Federal Reserve’s decisions on interest rates ripple across the globe. A rate hike makes the US dollar stronger, often pulling foreign investments out of other places like Indian markets.
This can stir up short-term jitters in equity mutual funds. On the flip side, rate cuts send more money flowing into India, boosting market performance and your fund returns.
The Oil Price Roller Coaster
India imports most of its crude oil, making it vulnerable to oil price swings. Rising oil prices mean higher inflation and a weaker rupee—bad news for fixed-income funds as bond prices drop. When oil prices fall, inflation eases, helping both equity and debt funds perform better.
What Should You Do?
While these shifts may feel unsettling, they’re often opportunities in disguise. Long-term investors can use market corrections to rebalance portfolios. By staying informed and aligning investments with both global and domestic trends, you can navigate these waves confidently.
(Contributed by Ankit Kumar Singh, Financial Planner, Team Prithvi, Hum Fauji Initiatives)
What did our clients ask us in the last 7 days?
Question: What financial milestones should I achieve before considering retirement?
Our Reply: Before considering retirement, achieving key financial milestones is essential to ensure financial stability, independence, and peace of mind during your golden years. These milestones provide the foundation for a secure future, allowing you to focus on your goals and passions without worrying about money:
- Own a Residential Property: Secure your dream house to stay before retirement to avoid rent-related expenses. This provides security and eliminates the need to spend on rent. However, avoid over-investing in real estate to maintain liquidity for other financial goals including having a life of your choice.
- Eliminate Debt: Clear all debts, including home loans, personal loans, and car loans. Starting retirement debt-free reduces financial strain on your pension or passive income. A good financial planner will be able to guide you on how to liquidate the debts with utmost tax efficiency and without jeopardising your future life’s requirements.
- Build a Retirement Corpus to Sustain Your Lifestyle and Goals: Funds like DSOPF, AGIF/NGIS/AFGIS, Leave Encashment, Gratuity, and Commuted Pension will form your financial base. Invest in mutual funds, some fixed deposits and others during your service to build additional wealth. This corpus should cover critical goals such as your children’s education, weddings, travel, and lifestyle needs.
- Achieve Financial Independence: Ensure that your pension and passive income sources—like SWPs (Systematic Withdrawal Plans), interest income, or rental income—exceed your monthly and lifestyle expenses. This independence safeguards your family and provides freedom from financial worries.
By focusing on these tailored milestones, you can step into retirement with confidence, knowing you have a plan that supports your dreams and the well-being of your family, enabling you to enjoy the life you’ve dedicated to serving your country.
(Contributed by Team Arjun, Hum Fauji Initiatives)
