Some good company (say SBI) bonds have coupon rate of 9%.
Q1. Does this imply that we can better invest in such bonds instead of debt funds (which have < 9% returns)? Or should I rephrase: why investing in such bonds is not good idea than investing in debt funds?
I have assumed below points while asking Q1:
- I have enough amount to buy large ticket bonds
- Such good company bonds are listed and hence can be liquidated easily. (Correct me if am wrong.)
- Listed bonds have the tax advantage of 20% capital gains tax along with indexation. So they have equal tax benefit as debt funds. (Correct me if am wrong.)
- High quality company bonds have near to zero credit risk. (Correct me if am wrong.)
Q2. I was guessing when debt funds are better than direct bonds investment. I feel that debt funds invest low quality bonds to increase returns and compensate risk, they diversify. This is the only reason that debt funds may be better (after above assumptions in bullet points). Am I right with this?