6.87% Bharat Bond ETF and FoF – April 2032 – Should you invest?
Edelweiss Mutual Funds has launched Bharat Bond ETF and FoF (Fund of Fund) which matures in April 2032. Bharat Bond Funds is an initiative from Government of India. Bharat Bond ETF – April 2032 is an Exchange Traded Fund that invests in fixed maturity tenure that matures in April, 2032. This fund would invest in bonds of public sector companies. It offers both ETF and Fund of Fund option for investors to invest in demat and non demat form respectively. Bharat Bond Funds issued in 2019 generated over 9% annualized returns. Should you invest in Bharat bond ETF and FoF – April 2032? Are there any hidden risk factors in this ETF or Fund?
Bharat Bond ETF – April 2032 – Features
Govt of India in collaboration with Edelweiss Mutual Funds has launched Bharat Bond Funds earlier which invests in bonds of Public Sector Companies. It has fixed maturity period. There were two tranches launched earlier with maturity in 2030 and 2031. Now they have come up with 2032 Tranche.
Bharat Bond ETF and FoF – April 2032 issue has now opened for subscription and closes on 9th December, 2021. After initial NFO period is over, it would again reopen for further subscription from 20th December, 2021.
Bharat Bond ETF – April 2032 can be considered if investors have demat account, otherwise one can consider Bharat Bond ETF FoF – April 2032.
Bharat Bond ETF 2032 invests in high quality “AAA” rated bonds of Public Sector Companies.
This specific ETF 2032 follows an index which has fixed maturity tenure.
It follows a simple strategy, buy and hold. Means, it would invest in PSU bonds and would wait till maturity of 10 years.
The benchmark for this fund would be Nifty Bharat Bond Index April 2032.
What does Nifty Bharat Bond Index April 2032 contain?
Nifty Bharat Bond Index Apr 2032 contains 8 Public Sector Companies. All these PSUs have 100% AAA rating with maturity date as 15th April, 2032. Yield to Maturity (YTM) is 6.87%. Here are the list of 8 companies and their weightage in index.
How the investment in these bonds works exactly?
How these bonds returns are comparable with traditional FDs?
Below is the snapshot of post tax returns from Bharat Bond Fund Vs Traditional FDs.
Why to invest in Bharat Bond ETF – April 2032?
1) It is one of the safe investment options, as it invests in the bonds of Public Sector Companies.
2) These ETFs provides stable returns and such returns are predictable. This ETF / Fund of Fund is expected to deliver 6.87% Yield.
3) While you invest in this ETF / FoF that matures in 10 years, there is no lock-in period. Investors can buy or sell them in stock exchange (demat form) or redeem with AMC.
4) It offers higher post tax returns i.e. lower tax as the returns are taxed at 20% of indexation.
5) This fund is managed with low cost i.e. Rs 1 for every Rs 2 Lakhs of investment.
6) One can invest as low as Rs 1,000 in these funds and have access to PSU bonds.
Bharat Bond ETF 2032 – Risk or Negative Factors
Here are some negative or risk factors.
1) The yield of 6.87% is an indicative yield and not guaranteed. The actual amount could be lower than this.
2) There are several AA and above rated NCD bonds which are coming to market that offers over 8% returns. Hence, there are better bonds generating higher returns compared to this bond ETF.
3) Investors should go through SID before investing in this ETF or mutual fund scheme.
Should you invest in Bharat Bond ETF – April 2032?
Bharat Bond Fund 2032 invests in 8 PSU bonds. This ETF is expected to generate around 6.87% yield. Bharat Bond Fund that came up in 2019 (maturity in 2030) had expected yield of 6.5%. Annualised returns till date are over 9%. Similary Bharat Bond Fund that came in 2020 matures in 2031 has generated 4.9% annualized returns. Bonds has been generating lower returns in the last 1.5 years. If you are medium to long term investor, and willing to hold your emotions when bond returns are lower, you can invest in such bonds. These are alternatives to tax free bonds where one can expect higher post tax returns (after indexation) if held till maturity of 10 years.
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