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Business News/ Money / Personal-finance/  Expert speak: Should investors buy g-secs directly?
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Expert speak: Should investors buy g-secs directly?

The Reserve Bank of India (RBI) is keen to have retail investors invest in these long-term bonds

From left to right: Lovaii Navlakhi, Kartik Jhaveri, G.V. Nageswara Rao and R. SivakumarPremium
From left to right: Lovaii Navlakhi, Kartik Jhaveri, G.V. Nageswara Rao and R. Sivakumar

The Indian government securities (g-secs) market is considered an institutional market place. But the Reserve Bank of India (RBI) is keen to have retail investors invest in these long-term bonds. Expert views:

LOVAII NAVLAKHI,

chief executive officer, International Money Matters Pvt. Ltd

G-secs are a safe investment, if you intend to hold to maturity. But their market prices fluctuate daily. Various complex factors can have an impact—inflation, liquidity, forex flows, demand and supply, RBI policy or expectation of that policy. At the moment, take exposure through mutual funds, and that too, only with the advise of a registered investment adviser with experience.

KARTIK JHAVERI,

founder and director, Transcend Consulting Ltd

This is the only product that gives you tenures as long as 20 or 30 years, and has a fixed rate of interest, and all this without any risk of default, i.e., sovereign guarantee. But there are compelling reasons for retail investors to invest in this product only via the mutual fund route. Along with the cost of buying directly, investors would find it difficult to track interest rate movements.

G.V. NAGESWARA RAO,

managing director and chief executive officer, National Securities Depository Ltd

G-secs are the only instrument that allow retail investors to lock in a fixed rate of interest for a very long period. While bank fixed deposits (FDs) are more popular, a disadvantage is that they are for a short term and need to be periodically renewed at new interest rates. Yields on g-secs are only slightly lower than bank FDs, which is a small price for getting long-term lock-in.

R. SIVAKUMAR,

head-fixed income, Axis Mutual Funds

In periods of falling rates, one key risk is reinvestment, i.e., a new FD booked on maturity will have a lower rate of interest than the old one. G-secs are available for maturities as long as 40 years. This reduces reinvestment risk for investors looking for steady long-term fixed income. Long-term g-secs offer a way to preserve income in part of your portfolio.

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Published: 04 Oct 2016, 04:07 PM IST
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