Why using interest from debt investments for SIP is a flawed strategy

When evaluating a financial product, don't just go by distributor's calculations. Do your own math before putting in the money.

Companies are coming up attractive interest rates on non-convertible debentures (NCD) issues. M&M Financial services will be offering 9.05 – 9.5 per cent on its NCDs opening that will open on January 4. Shriram Transport Finance issue that opens on January 7 will offer interest rates of 9.12-9.70 per cent. The rates vary with the tenure – longer the investment period, higher the interest rate offered.

Interesting, some distributors are suggesting investors put money in such NCD issues, opt for a monthly payout of interest income and use the amount for a systematic investment plan (SIP) in an equity fund. Distributors