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Points to ponder for US 64 bond investors

With the bonds nearing its maturity date, investors will have to decide on an alternate course of investment for their returns, writes Arnav Pandya.

india Updated: Apr 29, 2008 20:56 IST
Arnav Pandya

The US 64 bonds that were issued several years ago is nearing its maturity date. One of the longest investment routes is coming to an end for large number investors, and it is time for them to decide on what to do with the money that will accrue.


As far as the availability of the funds is concerned the investors will be receiving the face value of the bonds that they hold. The face value is Rs 100 so if a person is holding say 200 bonds then they will be receiving Rs 20,000 from the fund. This is the final return of the money for all their previous investments in the fund. All these years, the investors have been getting tax-free interest on the bonds. Now the bonds are maturing so the face value is coming back.


There are various investment options available to the investor. On one hand, there are various schemes offered by Mutual Fund from its large portfolio offerings and at the same time there are outside options that can be considered. This will increase the choice for the investor but it is important to consider the nature of the investment before deciding on anything. This is important for them to maintain a specific position and nature for their investment.


Many advisors have been suggesting various equity fund options for the US 64 bond investors. There is no doubt that the returns in these schemes can be higher than the debt option that a person might choose but there is a shift in the nature of the investment. A debt investment, in a risk free instrument, will lose its characteristics when converted into an equity fund and this has to be kept in mind. They can choose to roll over the investment into another debt, such as a deposit or even an income scheme but they will be subject to their own risk and this has to be understood.


Ultimately the final decision for the investor will depend upon what they want to do with available funds. The decision will influence the return on investment and hence it has to be evaluated carefully. While equity-oriented options will raise the probability of higher return, the investor will also have to bear high risk.

The author is a certified financial planner.