If you’re looking for safe investment options, learning how to buy bonds can be a good starting step. Bonds are becoming more and more appealing to many Indians as a steady source of income free from major risks.
Bonds Are Someone Else’s Debt
In some sense, bonds are debts. When you buy bonds, you are transferring money to a company or the government. They commit to paying you back with interest over a specified term. It is like lending money and getting paid back. For instance, you will earn $700 a year until the bond expires if you buy bonds worth $10,000 at 7% interest.
Why Should You Invest in Bonds?
Here are some strong arguments in favor of buying bonds:
- Bond interest is paid consistently.
- Government bonds are seen to be relatively safe.
- Bonds in your portfolio will allow you to balance your risk.
Bonds Not Available for Purchase in India: Categories
- Government bonds: Published by the national or state governments. These are safer.
- Corporate bonds: Issued by companies. They offer more benefits, even if they incur some risks.
- Tax-free bonds: Top earners will find these a great fit, as their interest is tax-free.
Buying Bonds in India: How to Approach It
Nowadays, it is easy to buy bonds via internet platforms. The method is as follows:
- Opening a demat account with any regulated broker is only a matter of form.
- Choose the bond type: Invest in the bond you want; investigate credit rating, term, and interest rate.
- Order Your Items: Order from the broker’s website or app.
- Either keep the bond in your demat account until maturity or sell it sooner if needed.
- Direct Purchase: You may also buy bonds straight from the RBI’s Retail Direct page or during bond issuances that are announced in newspapers and online.
Things to Check Before Making Bond Purchases:
- Credit Level: This exposes the relative safety of the bond. Though sometimes it comes with more risk, a better grade is preferred for risk versus reward.
- Make sure you feel comfortable locking money for that length of time.
Final Thoughts
To safely grow your money, buy bonds alongside stocks or mutual funds. Bonds especially give comfort amid market volatility. If you have never made investments before, start small, educate yourself, and progressively create your bond portfolio.