Short term corporate bonds are becoming a popular choice for Indian investors when it comes to earning higher returns than a savings account or fixed deposit. For those seeking low-risk investments with respectable returns over a reasonable period, these bonds are perfect.
Definition of Short Term Corporate Bonds
Short term corporate bonds are debt securities created by businesses seeking capital. Usually, these bonds have a one to three-year maturities. Over the period, investors pay interest; at maturity, they get their whole money back.
Given their temporary character, these are less risky than long-term corporate bonds. Indian businesses turn to them for temporary capital requirements.
Reasons You Should Give Them Thought
Short term corporate bonds can be a wise investment for the following reasons:
- More than savings accounts or fixed deposits
- Comparatively to long-term investments, lower risk
- Good liquidity since many are exchanged on markets
- Consistent income derived from interest payments
Items to Remember
Consider the following before purchasing short term corporate bonds:
- Bond’s credit rating should always be checked. Safer bonds are higher ratings ones.
- Compare the interest rates that several firms provide.
- Background of the company: Invest in bonds issued by reputable, financially strong corporations.
- Since interest earned is taxable, figure the post-tax return.
The Person Who Should Invest
Those seeking more returns than bank FDs would be suited for short term corporate bonds.
- Investors falling between low to medium risk
- Those needing money during the next one to three years
- Retired people searching for consistent income
Investing: How
- Stock exchanges like NSE or BSE are where you can invest in short term corporate bonds.
- Bond venues or agents
- Corporate bond funds in mutual funds
