with bonds doing well when the markets are under-performing and vice versa.
Bond investments are advisable for people who have longer investment horizons, as, typically, the tenure ranges from 10 years to 20 years.
It is beneficial to hold bonds for a longer duration since the possibility of capital appreciation is higher. In the longer run, it would also be possible to sell your bonds in the secondary market for a substantial profit (as bonds are now in demat form). The Rural Electrification Corporation (REC) tax-free bonds have just hit the market and offer investors time horizons varying from 10 years to 20 years, with interest ranging from 8.26% to 8.62% per annum.
The interest on these bonds will be paid annually and does not attract any tax. However, the principal repayment will be liable to capital gains tax — either long-term or short-term tax, depending on the duration one holds the bonds.
The writer is CEO and founder of Right Horizons