Many investors are looking for safe havens to make double-digit returns. Interest rates across the world have surged in the past 18 months. So, debt funds are your favorite to improve your returns compared to risky equity investments, which are often subjected to volatility because of various factors like political instability, war, and the non-performance of companies.
According to investment advisors at Joseph Stone Capital, the 10-year government bond market in the US trades higher at 3.6%, an increase of 250 basis points in the past one and a half years. It is risk-free. Therefore, investors like you can benefit from debt investments with higher yields. Consistently higher interest rates for longer periods mean it could offer better returns in the long run.
Favorable tax laws
The same trend prevails in emerging nations like India. With recent amendments in tax laws and higher yields on debt investments, India is your favorite destination for your investment and will reap double-digit returns. Investors from overseas nations, according to renowned investment advisors, are allocating their funds to gold, debt, and real estate. With equities ruling at their highs, most investors prefer real estate, debt, and gold to enjoy decent returns.
Corporate bonds in India account for $509 billion. The total value of bonds in India is estimated at $2.3 trillion. The bond market size worldwide is 1.4 times the GDP. Favorable tax laws make investments in debt at par with equity investments. In its February 2023 budget, the Indian government removed favorable treatment for market-linked debentures. As a result, the debt mutual funds in India will be brought under a slab rate in March 2023.
With changes in tax laws, mutual funds, government bonds, fixed deposits, and alternative investments are now taxable in India. As a result, more investors have increased their share of debt investments. However, hybrid funds, which comprise equity and debt, are an exception to tax arbitrage. You can get more details from your investment advisors at Joseph Stone Capital before deciding to make changes to your investment portfolio to earn higher yields.
According to a recent study, just 2% of the demat accounts in India have some type of debt securities. There is plenty of scope to increase your investment in debt. The uncertainty in equities in the past year has caused investors to shift their money to debt. Most investors are eager to cash in on rising interest rates. India is a favorite destination for investing in debt. However, you can consider selecting mutual funds that invest in both debt and equity to enhance your fund value and amass wealth.
Investors are checking whether the private credit market can provide higher returns than the public market. AIFs offer higher returns to investors leveraging debt investments. In the past decade, category 2 funds have offered the highest returns. The companies, which could not raise funds for their working capital or expansion needs, depend on debt. Investors like you can make use of this opportunity to enhance their returns. However, you should be careful when parking funds in high-risk companies. Therefore, you can seek the advice of reputed fund houses and investment advisors before parking funds for higher returns.
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