Non-taxable bonds

Bonds
1

Is buying non-taxable bonds from the market a good investment strategy?

2

Please state what you are comparing it to.

Buying non-taxable bonds from the market is obviously better than buying taxable bonds from the market.

Is it better than equities? - No
Is it riskier than equities? - No

Is it better than FDs? - Yes
Is it riskier than FDs? - Yes if corporate bond, no if govt bond

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3

@tallerballer, thanks.

4

ONLY if you fall in the 30% tax bracket or above. The YTM on tax free bonds is usually 150-200bps below comparable taxable bonds and there is a lock in period as well. Moreover, tax free bonds are less liquid than others. So calculate the Yield and do your pre tax and post tax yield comparison before taking a decision.

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