How investors can leverage from fixed income market in 2025
investment-grade bonds with zero volatility. Investors should look back at their portfolio performance this year, and incorporate learnings along with other factors that will help determine their asset allocation strategy in 2025.
Expectations of Returns
<div data-placement=«Mid Article Thumbnails» data-target_type=«mix» data-mode=«thumbnails-mid» style=«min-height:400px; margin-bottom:12px;» class=«wdt-taboola» id=«taboola-mid-article-thumbnails-116826672»>Equity may continue to remain volatile and retail customers may be best placed to rely on experts by investing through Mutual Funds. In Fixed Income, investors should continue to get the same fixed returns as earlier with Bank FDs and Debt MFs at 7-8% returns. In this situation, investors should explore the universe of Bonds where they can earn the same returns in ultra-safe Government bonds, or much more at 10-14% in Corporate Bonds. These bonds are issued by large companies (Tata, Piramal, Muthoot) and work just like FDs with regular interest and principal getting directly deposited to investors’ bank accounts. Globally, interest rates at the higher end of the yield curve are elevated, and it may be better for investors to lock in their fixed income investments at current interest rates before they soften.
Taxation Regime
Over the last few years, the Budgets have removed tax differences between FDs, Debt MFs and Bonds. In the Fixed Income space, the indexation benefits on Debt Mutual Funds was removed and they are now taxed the same as other Fixed Income products such as Bank FDs or Bonds. Earlier, an investor earning 7% in Debt MF effectively made 10% pre-tax thanks to the indexation benefit on LTCG, but with that benefit gone the return is now comparable to
