Bonds are a financial product that ensures consistent returns at low risk. Since the risk is low, the return on investment is also low. But the return is usually higher than a good deposit. Investing in bonds is considered safer than other investments. Investors invest in bonds for a long period.
What are bonds
Bands are an investment component in which the investor lends money to the company and in return the investor gets attractive interest on his principal investment which the company pays monthly, half-yearly or annually. Bonds are issued by heads, states, municipalities and private companies. Its time period can be from 5 to 7 years. Whenever a company or government needs money, it often borrows money from the public instead of taking a loan from the bank. And with this money they complete their projects. Whether it is building a road by the government or a private company constructing a building. In all these situations, they issue bonds to collect funds for their pending works.
Unlike equity, your creditor will be appointed in the company.
Types of bonds
There are many types of bonds available in the market. The time period, flexibility, prices and interest rates of all bonds are different. So let’s know how many types of bonds are available in the market.
Corporate bonds:
These bonds are issued by companies to raise funds. Which are issued to take loans for a fixed period. In this, when the policy matures, investors get investment money and interest based on the face value of the company.
Government bonds:
Just as a company needs funds for its expenses or purposes, similarly the government also needs funds for the ongoing activities for the development of the country. So to complete those tasks, the government issues bonds, the duration can be from 5 years to 10 years. This is the favorite bond of fans. Its investors consider it the safest investment.
Convertible bonds:
Since bonds are not for investing in the company but for lending, so those investors who wish to invest in the company through bonds, this convertible bond is for them. In this, investors can convert a certain number of bonds into equity stock. And the shareholders of the company can be ABN.
Zero coupon:
The maturity period of these bonds is less than 1 year and interest is not paid on them. Rather, the discount rate is provided to the investors which means at a price much lower than the face value of the company. These are for those statues who want to tie up their money for a short period of time. Issuance by the government, legal bills is an example of zero tax.
Sovereign-Gold Bonds:
Those who want to invest in digital gold, this bond is for them. These bonds have also been issued by the government. Tax exemption is also given by the government on investing in these bonds. Its time limit can be up to 8 years, which you can withdraw anytime after 5 years. This is a safe way to invest.
Floating Rate Saving Bonds:
These bonds are issued by RBI. The interest rates of these bonds keep increasing i.e. the interest rate at which investors invest in bonds is more or less. Its time limit can be up to seven years.
How to invest in bonds?
Investing in bonds has now become very easy. For this you have to open a demat account. There are different ways to invest in corporate bonds and government bonds. While to invest in corporate bonds you have to use the official website or branch office of the company, you can also invest in government bonds by opening a demat account. Through the demat account, the stock broker provides you all the information related to the bond. Which you can easily read and compare and then invest.
Is it safe to invest in bonds?
All types of investments are based on risk. Higher risk higher returns, lower risk lower returns. In the stock market, prices go up every day, no prediction can be made about its prices. Nor is the company related to it committed to the value of the stock market. But on the contrary, in bonds, under a formal agreement, the company is bound to pay a fixed interest to the bond holder on his investment. He has to pay it. Therefore, bonds are considered safer than other financial resources.
Bonds for a fixed period for a long period are a safe way. Which provides you fixed interest depending on the type of bond. I hope all this information given by me will be useful to you. If you have any question related to bonds, then definitely write in the comments