Balance yield with rating when choosing a bond, be aware of liquidity risk

Invest in individual bonds only if you can analyse and monitor the credit profile of companies

With debt mutual funds (MFs) losing the indexation benefit, investors in the higher tax brackets are looking for alternatives. Many are considering investing directly in bonds.

Control over security selection

Investing directly gives you control over what you buy. “You can decide the quality of the company whose bonds you will invest in and exit those you don’t wish to hold any longer,” says Ankit Gupta, co-founder, BondsIndia.com. In a debt MF, the fund manager decides the portfolio composition.

According to Vishal Goenka, co-founder, IndiaBonds, “Bonds can offer higher returns as there is no expense ratio cost, as is