There are many investment options available in the market, but the choice of investment instruments varies. You can know what are bonds? – a popular option known to render high yield in comparison to other options available in the domestic market.
Investment is a good decision, and every individual should go for it. An investment made in a safe instrument proves useful in the real time of needs. It can help you many ways. You can fulfil your varied goals in life which could be financial goals, marriage of your children, education of your children, accumulating funds to buy properties, or to build surplus for your happy retirement.
You can choose to invest in equities or fixed income instruments but if you are a risk-averse person experts’ advice you to make investment in a fixed income security. There are a number of advantages a fixed income security offers to an investor. You can learn about types of bond having great features.
What Are Bonds?
Bond are a debt security issued by an issuer to an investor. A bondholder is offered a fixed rate of interest at a defined interval and return of principal at the end date of maturity. Bond in India are not as popular as fixed deposits. Still, there are many individuals looking answer to the question what are bond? to understand it in a better way.
If you are a retail investor not aware of bonds and wish to go for an alternate investment option providing returns more than FDs in banks, check answer to the question what are bonds? as soon as possible. The more the information you gather the better will be your understanding and it will help you take better decisions.
Types Of Bonds
Bond are classified into various categories based on different factors. You can choose to invest in a bond you prefer suitable for you. There are various types of bond available in the market. Every bond type has its own pros and cons. You can consider investing in bonds considering the essential factors that can have direct impact on the yield.
It is better to gather detailed information about types of bond to make informed decisions. Bond comes with irresistible advantages.
Let us learn about the key types of bond here.
Below are the common bond types:
- Government security bond
- Convertible bond
- Corporate bond
- RBI Bond
- Zero Coupon Bond
- Inflation Linked Bond
- Sovereign gold bond
- Municipal Bond
- Advantages of choosing bond
Below are the Advantages of choosing bond
- Higher returns
- Fixed and predictable income
- Tax benefits
- Capital protection
- Liquidity
What is bond duration?
The duration of bond is of utmost importance and hence it is given due importance. Bond come with varied maturities. You can choose to invest in bonds considering the maturity suitable to your goals. You can learn what is bond duration in this section. Bond duration is termed as maturity in fixed income securities.
About what is bond duration?
The maturity is classified typically into three major categories.
They are as below:
- Short-term (1 – 5 years)
- Intermediate term (5 – 12 years)
- Long-term (over 12 years)
Bond interest rate
Every investor who invests in a bond deserves a return which can be floating or fixed. Some bonds pay you the face value of your bond at the time of maturity. Bond interest rate is termed as a coupon rate in fixed income securities,
The bond interest rate can vary from a bond to another bond type. It is generally higher than a few other investment instruments in the market.
The common Nomenclatures used in Bonds
- Face value
- Coupon rate
- Coupon frequency
- Maturity
- Issuer
- Credit rating
- Bondholder
There are several factors that you need to take into consideration to avoid any kind of disappointment. The return on your investment depends on a few essential things. If you are unable to take decision, you can consider expert advice or visit online platforms like bondsindia.com or others to gain knowledge about bond types and trends offering better returns.
Bond are known to be safe and high yielding investment options. Investment in certain bonds provides you the guarantee of total capital protection in comparison to rupee 5 lakhs guarantee through insurance in the case of fixed deposits (FDs). Your investment in government bonds comes with sovereign guarantee i.e., the principal is guaranteed by the government of India.
Bonds are an investment avenue. It has a great demand in the Indian market. The percentage of yield depends on your risk-taking capacity. Also, the yield depends upon the risk profile of individuals and the return he or she expects. You can now buy different types of government bonds online in minutes. It is better to educate yourself and invest smartly.
Summary – Individuals and institutions looking for higher returns on investment (ROI) can consider investing in bonds. You get the advantage of predictable income, maturities with different duration, protection of capital, liquidity, and minimal risks. Unlike other instruments, bonds too have some advantages. Do consider both pros and cons before
initiating a transaction to buy bonds online or through different sources.
