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				<title>Your Portfolio Doesn’t Need Bonds If You Don’t Need Income</title>
				<link>https://freefincal.com/your-portfolio-doesnt-need-bonds-if-you-dont-need-income/</link>
				<pubDate>Wed, 18 Mar 2026 00:30:53 +0000</pubDate>
								<dc:creator><![CDATA[M. Pattabiraman]]></dc:creator>				<guid isPermaLink="false">https://freefincal.com/?p=327409</guid>
					<description><![CDATA[There is a lot of interest in &#8220;high-interest bonds&#8221;. Unless you need a regular income...]]></description>

				<content:encoded><![CDATA[<figure><img src="https://freefincal.com/wp-content/uploads/2025/12/You-dont-need-bonds-if-you-dont-need-income.jpg" class="type:primaryImage" /></figure><p>There is a lot of interest in &#8220;high-interest bonds&#8221;. Unless you need a regular income (because you are retired or on a break, etc.), you don&#8217;t need bonds.</p>
<p>Even if you need a regular income, it is important to exercise extreme caution before buying non-central government/RBI bonds.  A bond typically pays out interest once or twice a year.</p>
<p>The lower the credit rating, the higher the interest rate. Which makes sense from one point of view and not from another. A financially unhealthy company must pay more interest to anyone who wishes to fund it (i.e., provide a risk premium to the lender). But then again, how will an entity already in trouble ensure payment of high interest?!</p>
<p>This is why I recommend avoiding all bonds issued by entities other than the central government or the RBI.</p>
<p><strong>What about state government bonds?</strong> These typically have higher interest rates and a low default risk, but there is always a risk of interest payment delays.</p>
<p><strong>What about AAA-rated bonds?</strong> When they are part of a mutual fund, the risk is significantly lower. When you buy them on your own, the concentration risk increases significantly. An AAA rating is only an opinion and not a guarantee of interest and principal repayment. These opinions can change overnight.</p>
<p><strong>So what should investors do?</strong></p>
<p>If you want a guaranteed regular income, buy bonds via <a href="https://rbiretaildirect.org.in/" target="_blank" rel="noopener">RBI Retail Direct</a>. Avoid any other private portal. See our discussions earlier.</p>
<ul>
<li><a href="https://freefincal.com/rbi-retail-direct-bonds-vs-rbi-floating-rate-bonds/">RBI Retail Direct Bonds vs RBI Floating Rate Bonds</a></li>
<li><a href="https://freefincal.com/life-insurance-pension-plan-vs-rbi-retail-direct-bond-which-is-better/">Life Insurance Pension Plan vs RBI Retail Direct Bond: Which is better?</a></li>
<li><a href="https://freefincal.com/how-i-used-rbi-retail-direct-to-buy-govt-bonds-and-create-an-income-source/">How I used RBI Retail Direct to buy govt. bonds and create an income source</a></li>
<li><a href="https://freefincal.com/rbi-retail-direct-for-govt-bonds-who-should-use-it-and-who-should-not/">RBI Retail Direct for govt bonds: Who should use it and who should not</a></li>
<li><a href="https://freefincal.com/rbi-retail-direct-a-look-inside-how-to-register-and-what-you-can-buy-sell/">RBI Retail Direct: A look inside: how to register and what you can buy/sell</a></li>
</ul>
<p>If you do not want a regular income, you can choose debt mutual funds.  You can consult <a href="https://freefincal.com/category/plumbline-select-mutual-funds/">Plumbline: Our free handpicked list of mutual funds</a> for recommendations. However, you must be aware of the risks of investing in a debt mutual fund. They are not a replacement for (safe) bank FDs. But then again, neither are high-interest-rate bonds.</p>
<p>For short-term goals of less than 5 years, stick to safe bank FDs and RDs (safe here means too-big-to-fail banks like SBI, ICICI, and HDFC, which the government would bail out).</p>
<p>For 5-7 year goals, use short-term debt mutual funds with high-quality bonds. For longer-term goals, use medium-term debt funds, such as high-quality bonds.</p>
<p>The post <a href="https://freefincal.com/your-portfolio-doesnt-need-bonds-if-you-dont-need-income/">Your Portfolio Doesn’t Need Bonds If You Don’t Need Income</a> appeared first on <a href="https://freefincal.com">freefincal</a>.</p>
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		<post-id xmlns="com-wordpress:feed-additions:1">327409</post-id>			</item>