Should you Boost your FD Portfolio with Corporate Bonds?

Do you rue everytime you look at their fixed income portfolio as your bank and government backed saving schemes fetch you a little? If yes, you are not alone. Most banks in India are doling out between 6-7 percent annual interest rate for a 1-3 year time frame.

- PRIYA KAPOOR

According to experts, as it is important to diversify your equity portfolio, it is equally important to spread your fixed income investments. A lesser known fixed income option but that can boost your fixed income portfolio is corporate bonds. Many good quality corporate bonds currently fetch 9-11% per annum yield compared to a 6-7% annual interest rate on 1-3 year bank FDs. Take for instance the bonds, which are currently open for subscription-Credit Access Grameen Limited and Viviriti Capital. They hold a coupon of 9.10% to 9.57%, respectively. "Every asset class has a role to play in a portfolio: equity is for growth, and fixed-income instruments like corporate bonds offer stability in a portfolio and generate income," says Bhuvanesh R, AVP, Business Analysis, Zerodha & Rainmatter.

WHAT ARE CORPORATE BONDS: Corporate bonds are issued by companies for raising finance for a variety of reasons such as for building a new plant, buying equipment or for business expansion. They are typically issued for more than a year. So far this year, companies have raised INR 6240.49 crore by issuing bonds. "The maturity of corporate bonds can start as low as 24 months to 10 years - so this flexibility (maturity profiles) allows investors to align their investments with their specific financial objectives. Whether it's a short-term liquidity requirement or a long-term goal, corporate bonds can offer maturities that cater to diverse needs." says Gaurav Sharma, Vice-President, IND Money.