Insights from finfluencer PR Sundar: Navigating Market-Linked Debentures

In the ever-evolving world of finance and investments, market-linked debentures have emerged as intriguing financial instruments. These products offer investors the prospect of higher returns while maintaining a degree of security, capturing significant attention in the process.

Market-linked debentures represent a distinctive blend, combining the reliability of fixed-income securities with the ever-shifting dynamics of the stock market. While they hold the allure of potential returns tied to market performance, they also harbor intricate details that demand a comprehensive understanding. PR Sundar, a seasoned stock market expert and prominent finfluencer, simplifies the concept of market-linked debentures.

In his explanation, PR Sundar Finfluencer provides an example: "Let's consider a company introducing a market-linked debenture. They state that if you invest Rs 100, after two years, they guarantee a return of Rs 114, equivalent to a 14% return. However, it's crucial to recognize that this 14% return isn't annual; it spans two years. When you calculate the internal rate of return, it averages to less than 6% per annum. Furthermore, they indicate that the 14% is the minimum return, but if the stock market performs well, your returns can potentially increase from 14% for two years to 20% or even 30%. Conversely, if the market declines, you still receive an assured return of 14% for two years. This structure eliminates downside risk while offering upside potential."

Explaining the company's approach, PR Sundar Finfluencer simplifies it as follows: "Imagine you give Rs 100 to the company. They allocate Rs 95 to safe investments that typically yield around 8% to 9% returns. Some banks even offer 7% to 7.5% on regular fixed deposits, while certain corporate bonds can provide up to 9%. So, when they invest Rs 95 in these secure options, it grows to about Rs 114 after two years, which they return to you, ensuring a minimum of Rs 114."

He further adds, "Now, with the remaining Rs 5, they engage in the stock market by purchasing call options, specifically NIFTY call options, which are typically long-term. If the stock market performs well over the next two years, these options can generate profits, resulting in additional gains for you. However, even if the stock market underperforms, you'll still receive the minimum Rs 114."

In presenting his perspective, the finfluencer PR Sundar states, "The fundamental question here is why you should entrust Rs 100 to someone, allowing them to allocate Rs 5 for options and Rs 95 for debt instruments. Why not invest the Rs 95 directly in debt instruments and use the remaining Rs 5 to buy the call option yourself?"

Elaborating on the company's standpoint, PR Sundar Finfluencer continues, "When a company introduces a structured product like this, they typically charge a management fee." He goes on to say, "If you manage it independently, you can bypass these fees."

Highlighting another advantage of a self-directed approach, he explains, "Consider I have Rs 100. Instead of delegating it to an asset management company, I can invest Rs 95 in a fixed deposit. By doing this, I can use that fixed deposit as collateral on the exchange, enabling me to trade with the Rs 95. This way, I can engage in trading activities while also purchasing a call option that could yield profits if the market rises. It's important to note that market-linked debentures cannot be used as collateral on the exchange, so there are specific advantages and disadvantages to consider."

In articulating his stance firmly, PR Sundar finfluencer states, "If I am the one making the investment decision, I would opt for direct investments rather than choosing market-linked debentures."

Market-linked debentures have evolved into a significant component of modern investment portfolios, and Finfluencer PR Sundar's insights serve as a valuable guide for individuals navigating this intricate financial landscape. With his extensive experience and commitment to investor education, Mr. PR Sundar continues to play a pivotal role in assisting individuals and institutions in making informed choices that align with their financial goals and risk tolerance. As the financial world continues to evolve, his expertise remains an indispensable resource.

Disclaimer : The above is a sponsored article and the views expressed are those of the sponsor/author and do not represent the stand and views of The Tribune editorial in any manner.

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