Bond is Debt security or interest-bearing Debt Certificate, which may offer you comparatively lower returns (when compared to Equity) but has very less risk attached to it akin to a Bank Deposit.
When you take a loan, the loan bears some interest rate. This loan must be paid on a specific date. A bond is like a loan where the authorized issuer is obliged to pay the bondholders interest as well as the principal (termed as maturity) at a later date or fixed intervals.
There are many types of Bonds in India which are issued by the Government as well as the private entities to fund specific activities. Bond is issued when funding requirement cannot be met from any other source.
What are the various types of Bonds available in the market?
- Government Bonds or Sovereign Debt is a risk-free investment that offers stable returns.
- Municipal Bonds are issued by State or local governments to fund government activities.
- Corporate Bonds are issued by large Corporates and carry higher yield as well as risks.
- Public Sector bonds are issued by PSUs and are very safe.
- High Yield Bonds are issued by new companies who are yet to establish themselves and therefore carry a very high risk. They carry a high coupon rate.
- Zero Coupon Bonds do not carry any specific coupon rate. They are offered at a discount to the investors, on the face value, who receive the face value back on maturity. The difference between the two is profit.
What are the various types of Bond Markets that exist in India?
There a basically two types of Bond Markets that exists in India.
- Primary Market where the bonds are sold by the issuer to the general public.
- Secondary Market where the investors sell their bonds to other investors.
Why should you invest in Bonds online?
- Bonds are a source of income.
- Bonds reduces the volatility of your portfolio by offering Diversification.
- Bonds ensures that your principal is always preserved.
- Bonds offer a tax advantage.
The Swaraj Finpro Private Limited Advantage!
Investing in Bond Markets is not as easy as investing in other Financial Markets. The bond market is mostly open to the big Corporates where market lots are available in Crores but smaller lots are also available for individuals. Retail investors can invest in Bond Market via online portals of NSE or BSE.
A new system is going to be launched in the market soon by the government which will allow all the Demat account holders of CDSL and NSDL to transact G-Secs on the RBI-managed Negotiated Dealing System-Order Matching (NDS-OM) platform.
Swaraj Finpro Private Limited’s year of expertise in the Bond Market will help you with your investments in the bond market and will ensure high ROI.