The Basic Things to Know About Bonds 

what are bonds

Bonds even today is an undisclosed product for many in India. Since fixed deposit is one of the popular and dependable investment products, people prefer parking their fund in it. Companies and SEBI is trying to educate the retail investors in the country through varied mediums.  

Companies like BondsIndia.com under its investor education program is sharing educational contents on bonds, types of bonds, and more on regular basis. The aim is to help people build trust in bonds and come forward to make investment in bons of varied types. 

The bond is a debt instrument issued by a borrower to pay back the amount borrowed at a fixed date, with interest.

Key Takeaways 

  • The issuer of bonds is awarded credit rating by agencies authorized for it. The ratings describe their investment grade. 
  • Bonds provide a variety of choices for the investment  
  • It is a fixed income security known to provide periodic income 
  • The income and interest are predictable 
  • Bonds with sovereign guarantee gives you the benefit of total capital protection.  
  • Bonds are a type of debt instrument that can be used by corporations or governments to finance their operations.
  • Bondholders lend money to the issuer in exchange for periodic interest payments.
  • The principal amount of the loan is repaid at maturity.
  • Bonds are often issued in denominations of $1,000.
  • The yield on a bond is the return that the bondholder receives from holding the bond. It is typically expressed as a percentage of the bond’s face value.
  • Bond prices and yields have an inverse relationship – when one goes up, the other goes down.
  • Riskier bonds typically have higher yields than safer bonds.
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Now that you know the basics about bonds, check out our blog for more in-depth information about this important investment tool.

The characteristics of bonds 

  • Maturity 
  • Face value 
  • Issuer 
  • Bondholder 
  • Coupon rate 
  • Tax status 
  • Callability 

Bonds is one of the high yielding products if held until maturity. It has many advantages and features that make it a demanding option for secure investing. The effort to make bonds known to all is working and people are seen taking interest in exploring answer to what is meant by bond? The online platform like bondsindia.com have made access to bonds free from hassle. 

About The Risks with Bonds 

The major risks associated with bonds are: 

  • Interest rate risk 
  • Credit/default risk 
  • Prepayment risk 

Today, even a common man is able to buy or sell bonds online. The process to trade in bonds is simple. You just need to visit their dedicated website, create an account, complete KYC, explore the listed bonds for the potential trade, choose the bonds you wish to buy and go ahead with the payment process.  

Now people are found exploring what are bonds and investing in corporate bonds, NCDs, and more confidently. You can live your dream of creating wealth for education of your loving children, marriage ceremony of your daughter or son, and for the happy retirement. Your decision to invest in bonds offering higher returns and in long term bonds can help you achieve your long-term financial needs.   

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The best debt mutual funds 

Below are the few top performing debt mutual funds 

  • Aditya Birla Sun Life Medium Term Fund 
  • UTI Bond Fund 
  • UTI Banking & PSU Debt Fund 
  • UTI Treasury Advantage Fund 
  • UTI Short-term Income Fund 

What is a bond fund?  

A bond fund is also referred to as a debt fund. It makes investments in bonds and other debt securities. A bond fund is also known as income fund that generally puts your money in a pool of investment options primarily in bonds (government bonds, corporate bonds, municipal bonds, etc.)  

Earlier people were thinking about fixed deposits and best debt mutual funds frequently. But with the widespread of awareness, the understanding about bonds is increasing amidst the potential retail investors.   

By Hammad Hassan

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