Finance

What Are The Types Of Bonds One Can Invest In India

One of the many investment options in India is bonds where investors can invest their money for a better return. The only difference between a stock and a bond is that a stockholder is eligible to have an equity stake in the company whereas the bondholder is considered the creditor stake. There are many bonds in India that one can invest in and one such is the sovereign gold bond

 

Today in this article Angel One is sharing different types of bonds one can invest in India. So let’s go and dig in the information pool of bonds.

Type of Bonds

Bonds are considered one of the safest instruments for investment as they have low risk involvement compared to any other options of investment. So let’s see what all bonds we have that we can invest in especially will focus on sovereign gold bond & Corporate bonds

  1. RBI Bonds – The interest rate of these bonds keeps fluctuating during the tenure and it is issued by the RBI with a tenure of 7 years referred to as RBI taxable bonds.
  2. Zero Coupon – They are also known as pure discount bonds where they do not offer any regular interest rate until and unless the bond is matured.
  3. Inflation linked – This bond is a protection that is provided against inflation and for the cutting out of the risk due to inflation in the investment that is issued by the government only.
  4. Government Security Bonds – It is a debt instrument that is issued by the central or the state Government of India. These bonds mainly offer a long term investment option between 5 to 40 years.
  5. Convertible – They offer features like debt and equity but not at the same time. Once the investment is done in convertible bonds the investors can benefit from both the features of debt and equity instruments.

This was a brief of the different types of bonds that you can invest in but let us dive into in detail about the two bonds that we have not talked about above.

Sovereign gold bond

Issued by the central government, Sovereign gold bonds are for investors who want to invest in gold but do not want the gold in physical form. The tenure of this bond is of 8 years and you can have the exit option after the 5th year which is exercised on the interest payment date.

Corporate bonds

To borrow money for a fixed period from investors, companies issue these bonds and give the investors a special interest rate throughout the tenure. Investors who want to earn a fixed interest rate can invest in corporate bonds. A corporate bond can be purchased by anyone, but there may be a great chance of default which can be influenced by the company which is issuing the bond, the firm’s industry, market condition, and its financial grade. But the risk is then compensated by a significant amount of money.

Conclusion

Investors who are Risk-averse can invest in this type of securities and bonds. If you are looking for a long term investment then these are your best options and for those as well who are new in the investment game and do not have much knowledge of investing in the stock market.

Reference:

https://www.elearnmarkets.com/blog/7-types-of-bonds-that-you-can-invest-in/

https://www.canarahsbclife.com/blog/financial-planning/6-type-of-bonds-to-invest-in-india.html

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