Not just for retirees: Why Gen Z should embrace bonds early in their journey

Bonds have long been seen as a retirement staple—safe, steady, and somewhat boring. But that perception is changing fast.

In this exclusive conversation, Vineet Agarwal, Co-Founder of alternative fixed-income platform Jiraaf, makes a compelling case for why Gen Z should look beyond equity and crypto hype and consider bonds as a smart, stable foundation for their financial journey.

With predictable returns, monthly cashflows, and low volatility, bonds are not just for the older generation—they’re a powerful tool for young investors building long-term wealth. Edited Excerpts –


Kshitij Anand: With equity markets facing uncertainty and economic cycles becoming unpredictable, how can bonds offer stability, income, and diversification benefit for investors in the current environment?
Vineet Agarwal: As you rightly pointed out, equity market, they have very-very high correlation with whatever is happening domestically and also internationally.

They respond very quickly to all the news, policies, etc, and hence, it is very-very difficult to predict how the market will move, especially in the short term. So, as an investor, the timing of the market becomes very-very critical, and it is impossible to predict and that is where bonds as an asset class for investment comes in because people tend to move towards more safer asset allocation strategies.

And bonds fundamentally is obviously safer than equity and hence, a good piece of allocation, especially in uncertain times, goes into bonds as a strategy, especially the corporate bonds, I would say, because the government securities, obviously, market prices are being factored there, but for corporate bonds, it takes time to have the impact of the market factored in the pricing of the bond because most of these bonds are fixed tenor, they have fixed ROI, and a fixed repayment schedule, and then it helps people to invest in such uncertain times, especially for the short-term natured investments.

Watch the livestream below
Bonds: The Key to Portfolio Balance

Kshitij Anand: Now, tell me in a world of market volatility and we are seeing interest rates also shifting, why are bonds becoming an essential tool for protecting and balancing investment portfolios today and how can bonds be used as a hedge against this interest rate volatility?
Vineet Agarwal: Again, what happens is that timing in case of an equity market plays a very-very critical role.

So, for example, if the markets were up and if you have entered the market when the market is up, and maybe if next one or two years the market might be down and as an investor you might not get any return for next two years, so timing of the market for short-term investment, which is less than three years, becomes very-very crucial in equity market.

If you are a long-term investor, say, if you have invested in equity market for say, with a 10-year horizon, then maybe the importance of timing is very-very low. Now, that is where bonds come into play because here you do not need to time the market. Why? Because the bonds are being issued for a particular time, say a two-year bond issued by a company, say a 12% IRR, and with maybe a monthly or a quarterly payment schedule.

Now, so it does not matter whether the market is up, market is down, you are getting what you are reading, plus you cannot do financial planning from an equity perspective, like if you need to have a regular cash flow for a short-term financial plan or you need…, say next year you know that I have to spend for my daughter's education or there is a wedding or you need an EMI that needs to be paid, that is where bonds again become a very-very critical asset because you can predict the cash flows correctly to the last digit and that is why in case of uncertain times and especially today, we have a favourable interest rate scenario as well, we believe that in the next one year or so, the interest rates will come down.

So, again, it becomes very-very critical that you lock-in good bonds at a good interest rate today where you do not have to worry about all the uncertainties happening around the world.

Kshitij Anand: There is another interesting question I wanted to put across to you — why are bonds often considered the missing piece in many individual investment strategies? If you look at the US, they have the biggest bond market, and if we have to grow and become the third-largest economy, I’m sure the bond market will play an important role in the near future as well.
Vineet Agarwal: Absolutely. So, we’ll have to go back in history, maybe. If you see traditionally, most of the investments or asset classes that people tended to invest in were long-term in nature.

We used to invest in land, we used to invest in gold, and then the equity market started. As we discussed, equity is also a very good product if you have a long-term horizon.

But traditionally, there were very few products where you could invest for the short term. The only product that people traditionally used for short-term parking of money was fixed deposits.

Now, fixed deposits are a great product, but the challenge is that the yield you get in a country like India is often less than the rate of inflation. So, essentially, you’re losing money by putting it in a fixed deposit.

The only alternative for short-term investment — say, between one to three years — where you have an opportunity to beat inflation, predict the cash flows (which are not market-linked), and generate decent returns that help in wealth creation, is bonds.

Today, bonds ranging from BBB rated to AA rated can offer 8% to 14% IRR. You don’t need to invest for more than two to two-and-a-half years, and you can get monthly or quarterly cash flows.

So, this is the only product that offers such a unique value proposition, and hence, it’s the missing piece, I would say. Traditionally, people didn’t have this option — awareness was lacking, and so was access. Now, both awareness and access have improved considerably due to technology. Over the last few years, people have started realizing the importance of this missing piece and are allocating anywhere between 20% to 30% or even 40%, depending on their investor profile, to bonds in their overall portfolio.

Kshitij Anand: Let me also get your perspective on how much allocation to bonds is ideal for different investor profiles. You did mention in the last question that people are, on average, investing around 30% to 40% in this asset class, but if we look at conservative, balanced, and aggressive investors, could you break it down for them?
Vineet Agarwal: So, for an aggressive investor, by nature, they tend to take higher risks, so naturally, they will have a higher allocation to equity — maybe 70% to 75% in equity and about 25% to 30% in debt or bonds.

For a balanced investor, I’d suggest a 60:40 mix — that is, 60% in equity and 40% in bonds.

For a conservative investor, I would flip that — a 40:60 mix, meaning 40% in equity and 60% in bonds, would be an ideal allocation, depending on the investor's category and risk appetite.

Kshitij Anand: And well, we are also addressing the Gen Z population at this point in time, so we could say that there is a misconception—should younger investors also consider some allocation to bonds, or are bonds only for retirees or conservative investors? The reason I say that is because, probably two or three years ago, equity was the go-to asset class, but now, perhaps, cryptos have taken over that space in the Gen Z portfolio. It seems more "cool" to invest in crypto rather than in the equity market. But yes, there are more social trends that influence this. From your perspective, is this something the younger population should also look at early on, so that they can build wealth over time?
Vineet Agarwal: Yes, absolutely. Fundamentally, if you see, I would say that once a person starts earning and accessing the financial ecosystem, from an investment point of view, the first thing they should do is book a small FD.

This helps them understand what an FD is. The second product I would recommend is bonds or SIPs, because they are inherently simple products—easy to understand, with low correlation to the markets, and they can help build wealth.

The third product should be direct equities. That’s where you start analysing companies, buying shares, and understanding fundamentals and various valuation metrics.

The fourth would be buying unlisted or private company shares. And I would say the fifth should be crypto, because by then you have developed enough knowledge and understanding of how the financial ecosystem works.

Start with the simplest products—FDs, followed by bonds and SIPs, then direct equity, unlisted shares, and finally, crypto.

Especially between the ages of 25 to 35 or 40, which I would call the early years of earning, you need to focus a lot on financial planning—both short-term and long-term. For short-term financial planning, again, bonds are the missing piece, as we’ve already discussed. You should think of bonds like a rental asset class. For example, they give you interest every month or quarter—without taking on equity risk and with very low investment amounts.

If you want a rental asset class, you usually need to invest Rs 50 lakh, Rs 1 crore, or even Rs 5 crore to get an asset that gives you monthly rentals.

Bonds, on the other hand, can give you monthly income starting with as little as Rs 10,000, Rs 20,000, or Rs 30,000. You can start building a financial plan with bonds as a key part of your portfolio.

We have many investors in our company who have done very smart financial planning. Just to give you an example: if you’ve bought a car or a bike and need to pay a monthly EMI, you might get a loan at, say, 8%.

What some people have done is take a Rs 2 lakh loan at 8% and invest that Rs 2 lakh in bonds yielding 12-13%. Every month, they get interest from the bond issuer, which they use to pay their EMI. The extra 4-5% becomes additional income.

Similarly, many people invest in bonds in their parents’ names. The monthly interest received is often enough to cover the parents’ expenses.

If someone wants to go on a foreign trip in two years that will cost Rs 2 lakh, but they only have Rs 1.5 lakh today, they can invest that Rs 1.5 lakh in a bond yielding 12-13%, which will mature into Rs 2 lakh in two years—fixed, with no relation to the market’s ups and downs.

You can do monthly or quarterly financial planning with bonds. In fact, once you’re 45 or 50, you’ll likely have already earned and planned a lot financially. So, the earlier you understand all of this, the more wealth-creation opportunities you can unlock for yourself.

Watch the livestream below
Bonds: The Key to Portfolio Balance

Kshitij Anand: Well, we have talked about investment, and we have talked about portfolio allocation. But the other big and important piece is how different types of bonds are taxed in India. If you could shed some light on that as well?
Vineet Agarwal: I’ll explain it very simply. With bonds, you receive interest on your investment. And interest is treated as additional income. So, because you are earning additional income, it is taxed according to your income tax slab.

For example, if someone has a salary of Rs 20 lakh and they earn Rs 1 lakh as interest income, they must declare a total income of Rs 21 lakh for the year and will be taxed accordingly.

However, if you buy and sell a bond before maturity, any gains made are treated as capital gains. Now, if you hold the bond for more than one year, the capital gains tax is 12.5%, which is similar to equity taxation.

There’s also a category called zero-coupon bonds, where you don’t receive any coupon payments during the bond’s tenure and receive the entire amount at maturity. If a zero-coupon bond is held for more than one year, the taxation is again at 12.5%.

In all other cases, the taxation is as per the individual’s income tax slab.

Kshitij Anand: How can investors easily access bonds today? Is direct purchase the right method, or should they go through mutual fund houses, bond ETFs, or platforms like Jiraaf?
Vineet Agarwal: As I mentioned, when we started the company, there were very few avenues for people to directly buy bonds. But today, you can buy bonds in a very seamless manner—just like buying equities.

People can come to our platform, complete their KYC, and start investing in multiple bonds listed on the platform.

There are multiple such platforms available now, and investors can choose any platform they like and buy bonds in a very seamless manner.

Kshitij Anand: Let’s also talk a little bit about the future. What innovations in the bond markets should investors watch out for in the near future? The world is changing with AI and other innovations. Have you thought of any such innovations that might be in the pipeline for the bond market?
Vineet Agarwal: I would say that over the last three to four years, phase one of innovation has been completed.

What was phase one? It was simply providing access. Four years ago, people had no easy access to bonds. Today, platforms like ours are integrated with BSE, NSE, NSDL, and CDSL. These institutions have built technology that allows people to buy bonds easily.

Now, I would say we are entering phase two of innovation. All the innovations that have happened in the equity markets will start appearing in the bond markets as well.

These include things like SIPs, baskets, a more active secondary market for buying and selling bonds, and an expanded financial ecosystem around bonds.

With rapid technological advancement, I believe features like AI and bond analytics will also be part of phase two.

Sooner rather than later, I think the equity and bond markets will converge in terms of features. While the equity market has a 20-year head start in India, in the next five years, the bond market will be just as vibrant as the equity and mutual fund markets are today.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)