[vaibhav_a_a]

Originally Posted by SmartCat

These 2 statements are contradictory though. Price discovery and realization cannot be far better in the secondary markets, if they do not have depth and liquidity (low bid/ask spread).

The websites you listed are considered as debt security brokers and need to be SEBI registered.
https://www.business-standard.com/fi...2800957_1.html
Full list: https://www.sebi.gov.in/online-bond-...providers.html

So other than limited number of debt securities, there is no other negative, since they match the buyers and sellers thereby solving the liquidity problem. And if you need choice, you can always sign up with multiple such platform. The debt securities are held in investor's demat account as usual.

Since it is regulated by SEBI, very likely these bond platform have systems in place to protect bond investors interest, especially if he wants an early exit. Even if an investor skeptical and not happy with the offer price, the investor always has the choice of NOT exiting the bond and holding it till maturity.

These sites do not connect you to the exchange - you're welcome to try. I have tried 6 of them over the years and then written last two posts.

They charge a dealer commission for all buy and sell this resulting in worse price realisation compared to what one gets when doing exactly that on the exchange.

Your options are limited to the pool on that site (and each has a niche - state govt securities, nbfc, startup etc debt ) and not what is getting reported on the debt segment report for that day.

But sure why don't you try ��

[SmartCat]

Originally Posted by vaibhav_a_a

These sites do not connect you to the exchange - you're welcome to try. But sure why don't you try

You don't need the exchange. Even for buying and selling equities. They are called off-market transactions. That's how everybody invests in unlisted stocks. https://nsdl.co.in/services/offmarket.php



The above diagram is what exactly happens when you invest via these SEBI registered bond platform. Just replace 'NSDL' with the bond platform name.

[vaibhav_a_a]

I'll close my comments on this subject by saying this - your theoretical knowledge on this topic holds little value in the face of the practical realities (read pitfalls and troubles) I have experienced.

p.s. on the diagram, bad analogy and misses a crucial step - the insight into what is available in DP1 and DP2 incl vol and price is via a dealer, with their own commission. In case of debt the commissions can be steep when not going via exchange but via a dealer. The dealer will simply give you, seller, a lower price and since you don't have the benefit of the screen of the exchange you can either take it or leave it. If going via exchange the broker is mandated to charge a % of the transaction only which they have to disclose on the site, etc.

Anyways, this is getting long.

peace.

[whitewing]

Originally Posted by vaibhav_a_a

...the insight into what is available in DP1 and DP2 incl vol and price is via a dealer, with their own commission. In case of debt the commissions can be steep when not going via exchange but via a dealer. The dealer will simply give you, seller, a lower price and since you don't have the benefit of the screen of the exchange you can either take it or leave it. If going via exchange the broker is mandated to charge a % of the transaction only which they have to disclose on the site, etc.
..

I have been investing in goldenpi & Tipsons since a few years. I agree with the observation that the view of what is on offer, is limited to that just that particular broker.
Also, there is no transparency on the commission that the broker makes - I always see ~1k difference between what is quoted in goldenpi vs that in tipsons.

On the buy side, based on the transaction details (buy side), it appears to be 0% commission. Till date, I have only made purchases and yet to make a sale. Hence not aware of the typical commission one incurs while making a sale.
Can you please shed light on this?

[MightyHorse1188]

Originally Posted by adimicra

Thanks for the response...
What it means is - we should continue to hold the debt funds as long as possible, preferably till retirement.
Because, currently if I withdraw, I need to pay 39% tax as per my income tax slab.
But, after I retire, since I don't have salary income, the only income is the capital gains from funds.. So, if we withdraw only the amount needed for our expenses, it will be way less than the salary income. So, we can probably get away with just 15-20% overall tax rate based on one's expenses. Which is a huge huge benefit.
Also, as you said, when we need the money for our expenses, best to sell the ones with least capital gains.

Admicra, holding the debt funds until retirement might not beat inflation in all likelihood. Well again this is not a one size fits all and depends on who is taking the decision.Generally if somebody is saving for retirement which is not less than 5 years away, wouldn't be ideal to invest in debt funds since the CAGR (for > 3yrs, even pre-tax),wouldn't be expected to be more than inflation rate if not less.

What you said in isolation, purely to save tax makes sense, however for overall wealth creation you miss out on a decent opportunity.

Actually holding on to or investing into fixed income securities makes more sense only post retirement(or even nearing retirement), because at that point you will already have a large corpus and you wouldn't want a very high volatility and just want a conduit to hold your money for your post retirement needs as long as you are keeping up that value with inflation.

So, for others who aren't nearing retirement, debt investment makes sense mostly if it is for a short term horizon/goal not more than 3 years like buying a new car downpayment for a home or other lifestyle expenses, in which case you need to be mentally prepared to pay a capital gains tax at your prevailing tax rate(which may or may not be favourable).Since you're at 39% tax bracket then you should consider arbitrage funds for better post tax returns.

Cheers!

[vaibhav_a_a]

Originally Posted by whitewing

I have been investing in goldenpi & Tipsons since a few years. I agree with the observation that the view of what is on offer, is limited to that just that particular broker.
Also, there is no transparency on the commission that the broker makes - I always see ~1k difference between what is quoted in goldenpi vs that in tipsons.

On the buy side, based on the transaction details (buy side), it appears to be 0% commission. Till date, I have only made purchases and yet to make a sale. Hence not aware of the typical commission one incurs while making a sale.
Can you please shed light on this?

Well, sometimes these sites will also include the shut period interest as a part of the promised cash flow - so be careful with that. Also looking at the screenshot posted, look at the price, you're paying 102 and change for a security of 100. This is part of the quoted price and of course, this depends on various factors such as availability, demand, rating, TTM etc.

In general, the dealers such as the ones I've quoted will give this price higher than what you can find on an exchange - and that's the practical observation I was talking about. In all these years, I've found that buying via your regular broker on the app / site works out cheaper and if the volume you need is decent the difference can add up. Trouble is finding the exact scrip (issues covered in #253)

I've only tried to sell once, didn't actually, but got the quote. It was almost 1% commission and I told my RM - ghar nahi bechna bond bechna hai and held onto it. . This was for AA rated! Imagine if I had to tried selling A or BBB.

In general you'd be offered a 0.5% cut deal for most listed stuff. This is typically on the price that is available on the exchange on that day.

Unlisted is another story - haven't gone there yet.

[SmartCat]

Originally Posted by whitewing

On the buy side, based on the transaction details (buy side), it appears to be 0% commission. Till date, I have only made purchases and yet to make a sale. Hence not aware of the typical commission one incurs while making a sale.

From what I understand, the commission is zero. It doesn't make sense to charge large commissions because it will hit investor returns, on a product that offers inflation plus returns.

As a business, they charge listing fees for the company that is issuing the bond (or perhaps the merchant banker who is managing the bond issuance). That's why there is a limited list of bonds to choose from on each platform.

[adimicra]

Originally Posted by MightyHorse1188

Admicra, holding the debt funds until retirement might not beat inflation in all likelihood. Well again this is not a one size fits all and depends on who is taking the decision.Generally if somebody is saving for retirement which is not less than 5 years away, wouldn't be ideal to invest in debt funds since the CAGR (for > 3yrs, even pre-tax),wouldn't be expected to be more than inflation rate if not less.

What you said in isolation, purely to save tax makes sense, however for overall wealth creation you miss out on a decent opportunity.

Actually holding on to or investing into fixed income securities makes more sense only post retirement(or even nearing retirement), because at that point you will already have a large corpus and you wouldn't want a very high volatility and just want a conduit to hold your money for your post retirement needs as long as you are keeping up that value with inflation.

So, for others who aren't nearing retirement, debt investment makes sense mostly if it is for a short term horizon/goal not more than 3 years like buying a new car downpayment for a home or other lifestyle expenses, in which case you need to be mentally prepared to pay a capital gains tax at your prevailing tax rate(which may or may not be favourable).Since you're at 39% tax bracket then you should consider arbitrage funds for better post tax returns.

Cheers!

Hey, thanks man for your response.
I have a proper asset allocation plan, and retirement strategy in place.
I actually can talk about it for several hours

I just wanted clarificaiton about the tax expenses.

[MightyHorse1188]

Originally Posted by adimicra

Hey, thanks man for your response.
I have a proper asset allocation plan, and retirement strategy in place.
I actually can talk about it for several hours

I just wanted clarificaiton about the tax expenses.

Hey,
Im sure you have figured that out!

Just clarifying that my response was not to suggest any investment plan/strategy, rather intended to throw some light on the below quote from your earlier post, where I felt some considerations were possibly missed out.

Originally Posted by adimicra

What it means is - we should continue to hold the debt funds as long as possible, preferably till retirement.

In my opinion, taking this decision just to save tax will have other implications(Solely on the assumption one would have wanted to sell the debt fund at an earlier date if not for the higher tax liability due to the current slab rate), which I just wanted to remind you about.

Cheers!

PS - Also do consider that taxation laws are not constant, hence subject to lot of changes(Sometimes very steep).Who knows what the future capital gains taxation will look like, when we retire. So my suggestion for everyone is to plan their taxes only if you have a relevant transaction in the current year,else leave it as a problem to tackle in the future! Just a food for thought

[adimicra]

Originally Posted by MightyHorse1188

Hey,
Im sure you have figured that out!

Just clarifying that my response was not to suggest any investment plan/strategy, rather intended to throw some light on the below quote from your earlier post, where I felt some considerations were possibly missed out.



In my opinion, taking this decision just to save tax will have other implications(Solely on the assumption one would have wanted to sell the debt fund at an earlier date if not for the higher tax liability due to the current slab rate), which I just wanted to remind you about.

Cheers!

PS - Also do consider that taxation laws are not constant, hence subject to lot of changes(Sometimes very steep).Who knows what the future capital gains taxation will look like, when we retire. So my suggestion for everyone is to plan their taxes only if you have a relevant transaction in the current year,else leave it as a problem to tackle in the future! Just a food for thought

Not sure I understand your point here, but thanks anyways.
I was just clarifying the tax implications on selling debt funds post retirement, which will be considerably lower.
Whatever be the tax laws, I am sure 'slab rate' after retirement will be less than current 'slab rate'.

Anyways, I am done with this topic, peace.

[MightyHorse1188]

Originally Posted by adimicra

Not sure I understand your point here, but thanks anyways.
I was just clarifying the tax implications on selling debt funds post retirement, which will be considerably lower.
Whatever be the tax laws, I am sure 'slab rate' after retirement will be less than current 'slab rate'.

Anyways, I am done with this topic, peace.

Fair enough Adimicra. I was hoping that the information would have been useful for you based on the initial doubt you had on taxation.

No worries and Im sorry if the language of my content was not basic enough,hopefully others with similar doubts were able to get a better clarification.

[vaibhav_a_a]

Originally Posted by MightyHorse1188

Cheers!

PS - Also do consider that taxation laws are not constant, hence subject to lot of changes(Sometimes very steep).Who knows what the future capital gains taxation will look like, when we retire. So my suggestion for everyone is to plan their taxes only if you have a relevant transaction in the current year,else leave it as a problem to tackle in the future! Just a food for thought

Very true. Seen this in the changes made in March 23 and then again reversals in Jul 24 budgets. All strategies to invest in debt that month just to benefit from lower tax failed.

[warrioraks]

Originally Posted by warrioraks

Does anyone know how to invest in listed bonds? I tried searching on the app that I use for investing but only saw the option to buy and sell SGBs.

Came across some content which mentioned that LTCG on listed bonds and debentures is 12.5%. Now this seems weird at a time when debt MFs are being taxed at marginal (slab rate). Seems worth exploring if there are tax benefits.

Originally Posted by SmartCat

https://goldenpi.com/

Zerodha/Rainmatter is an early investor in GoldenPi.

Originally Posted by vaibhav_a_a

- I'd not recommend parking funds in these basis tax treatment since capital gains in NCDs / Bonds is quite limited. They are good for fixed interest though (basically better than FD but limited liquidity)

Basis all the advice and some of my own research including setting up an account with goldenpi.com, I have come to the same conclusion as Vaibhav.

The bond and debenture market lacks depth so this mostly makes sense for individuals who are looking for corporate FD kind of instrument. For liquidity, capital gain and ease of transactions - debt MFs are the way to go.

[vaibhav_a_a]

For those interested in the retail NCD market :

The opportunity for Indian retail investors to get decent (high single-digit / early double-digit) returns from the NCD market will likely dwindle further in the next year or so. The reason is after the US Fed has started cutting rates, several Indian corporates plan to raise foreign debt: https://www.moneycontrol.com/news/bu...-12825675.html

This contrasts with 2023 when Indian firms' dollar bond issuance hit 14 year low due to elevated yields and instead, these firms tapped the domestic bond market (offering indian retail investors some good opportunities): https://www.reuters.com/world/india/...es-2023-12-20/

[srsrini]

Originally Posted by saket77

Yes, any such entity can also invest. Paperwork requirements will be more- like partner's list, authorised signatory list, LLP/ partnership agreements, board resolutions in case of co., bank proof on the entity, more requirements in FATCA and UBO, etc. HUFs can also invest.

Regards.

And to add, since there is additional paperwork involved, setting up the accounts may be an offline process. Transactions may need a maker-checker approval system.