Bonds
An investment avenue in which an investor loans money to an entity (government or corporate) that borrows funds for a defined period of time at a fixed interest rate.
Bond market has not attracted retail investors to it. But in recent times, lackluster equity markets and low rate of interest have attracted retail investors towards bonds issued by corporate.
Advantage: the rate of interest is high.
Disadvantage: no security, interest earned is taxable. So before investing in bonds do check the credibility of the company offering the bond and past record of the company.
Bonds are issued by the Reserve Bank Of India (RBI).
The rate of interest payable half yearly. Tenure is seven years.
Advantages: safety, guaranteed return.
Disadvantage: interest is taxable.
Corporate Non-Convertible Debentures (NCDs) are fixed-income instruments issued by companies to raise funds from investors. Unlike convertible debentures, they cannot be converted into equity shares and offer a fixed or variable rate of return over a specified period.
They are typically used by investors seeking regular income, as many NCDs provide periodic interest payouts (monthly, quarterly, or annually). Compared to traditional fixed deposits, NCDs may offer relatively higher returns, depending on the credit profile of the issuer.
NCDs are listed on exchanges, providing liquidity, though prices may fluctuate based on interest rate movements and market conditions. Investors should consider factors like credit rating, tenure, and payout options before investing.
Retail investors have not tapped this investment avenue as much as others. It is good for investors looking for reasonable returns with no risk of default as the securities the Government offers these securities.
These securities can be held in a demat format. The market is limited so liquidity can be a problem.
Investors need to have a thorough knowledge of this investment format to invest in them.
Well, then if you are the one who prefer the comforts of safety to the greed of high returns all the above debt instruments are yours to invest in.
