WHY SHOULD YOU INVEST IN BONDS?

 YOU ARE INVESTING IN FIXED DEPOSITS WHY NOT INVEST IN

BONDS

Bonds are commonly referred to as fixed-income securities and are one of the three main generic asset classes, along with stocks (Equities) and cash equivalents. Many corporate and government bonds are publicly traded on exchanges. while others are traded only over-the-counter (OTC).

WHAT IS A BOND?

Bonds are debt instruments issued by corporates or public sector entities, like municipalities, states, or central government entities. An investor can invest his money in bonds for a fixed tenure and at a fixed rate of interest. You can either buy the bonds at the time of their issue or from the Secondary Market where they are traded after the issue.

Points to Consider in Bond Investing

Credit Rating: 

Bonds are assigned ratings by rating agencies like CRISIL, ICRA, etc., on the basis of their credibility. The ratings are like AAA, AAA+, AAA-, AA, BB, BBB, etc. and each rating represents varied levels of safety with regard to payments of interest and principal. The better the rating, the lesser the risk.

Tenure: 

The tenure of the bond should be in line with your investment horizon. Though there is an option of secondary market trade, but there is always an interest rate risk if you encash it before maturity.

WHY SHOULD YOU INVEST IN BONDS?

► Bonds bear fixed interest rates like FD and the average rate of return of a bond is around 8-10% while Fixed Deposits bear an interest rate of 5-6% on an average

► Bonds can be redeemed before maturity as they are traded in the secondary market

► You can do a bond transaction online through your Demat account

► No TDS on interest payouts

► In case of long-term capital gains, the investor gets the benefit of indexation

► A bond transaction is quick. Payment is via RTGS and the bond will be credited into your Demat A/C by the end of day

COMPARISON

Comparison between FD & Bonds

Basis of Comparison	Fixed Deposits	Bonds
Interest Rate	5-6% p.a	8-10% p.a
Liquidity	No. Penalty on premature withdrawal	Yes. Can be traded in the Secondary market
TDS	YES	NO
Short term Capital Gain	As per investor's Tax Slab	As per investor's Tax Slab
Long term Capital Gain	As per investor's Tax Slab	Benefit of indexation

Disclaimer: The figures/projections are for illustrative purposes only. The situations/results may or may not materialize in the future. Mutual Fund investments are subject to market risk, Read all scheme-related documents carefully. Past performance may or may not be repeated in the future.