5 Tips on buying bonds in India

Companies are able to raise money in the market in one of two ways, issue stock or issue the debt instrument also known as a bond. Stock transfers some ownership of the company to stockholders, while bonds don’t give any ownership to the buyer; the company seeks and will pay the buyer when it matures with interest. 

Although making investments with ownership securities can lead to a great amount of wealth, you should keep in mind that it is extremely risky and that it is possible for you to lose all your wealth during a market crash. Bonds make you a creditor to either the company or the government, which means according to the law, the money must be returned to you with interest similar to all other types of loans. 

Bonds are a good idea if you want a fixed gain over a long period; for example, a retired person or someone planning to pay for his education in a few years might consider them. Read the information below to learn how to invest in bonds in India and what are bonds in India as well Where to buy bonds in India

5 Tips on buying bonds in India

The following are common terms that may appear. Familiarize yourself with bond-related terminology before buying bonds online because it’ll help you make the right choices.

1. The sum of money that is returned to you upon maturity is called face or par value, or principal.

2. The term ‘coupon rate’ essentially means the interest rate on the face of the bond that you will receive during the term of the bond.

3. The cost of a bond changes throughout its existence, as the result of a number of factors.

4. When the selling price is higher than the buying amount, it is called premium.

5. A bond sold at discount is one that is selling below face value.

Where you should buy bonds. A bonds can be purchased at either a full-service or a discount brokerage. An alternative way of purchasing bonds is a bond broker, but your initial investment must be at least $5000. Buy into mutual funds which mainly invest in bonds.

Purchasing bonds through the government. Both state and federal governments sell bonds to get money for their projects. You can buy government bonds through one of the four methods above or directly from the Treasury. Visit BondsIndia to invest in government bonds in India.

Consider these tips, and beware. Check the actual trading price of the bond against the broker’s quote. In many cases, brokers add margin to your transaction so that they can be paid a commission. Before you invest in any government bonds issues, make sure you research because they can fluctuate. Investments backed by the government are the most secure, because your return is guaranteed.

This should have provided you with a fundamental awareness of the bond buying process, and the way to make this a long range investment. Begin gradually, accumulate practice and experience, and then start to experiment with the different kinds of bonds that you can buy.