What are the Types of Bonds in India?
You may be thinking about investing your money into bonds. These are viewed as being less risky than the share market, as companies or governments guarantee them.
Government bonds in India are seen to be the most secure of all bonds, as it is more likely that a corporation could go bankrupt before the government.
Know how to buy government bonds in India.
When you take out a bond, you are actually loaning money to that organization or government entity and they will pay back to you your initial investment plus the additional money you earn for lending them your money. Make sure that you consider what is the best investment for you situation that is secondary Bonds as well know bonds to buy or bonds to invest in India as well Best bonds to invest in bonds in India.
See what is the importance of bonds in your portfolio.
Zero Coupon bonds are possibly the most common bonds you have heard about. These are in the news a lot as the Uncle Sam is raising money to bail out the economy from the recent financial crisis. These are long term so you need to be prepared to invest your money, most likely for more than 10 years.
This type of bonds is viewed as one of the safest that you can make. These bonds are sometimes called T-Bills. Similar to treasury bonds are agency bonds. Agency bonds are issued by India Government agencies. These bonds are not viewed as being as safe as treasury bonds are. Although these are backed by the India Government they are not guaranteed by the India Government, unlike the treasury ones which are guaranteed.
Another type of these are municipal bonds. These bonds are issued by state, local or city governments to raise funds to provide services to the community. These services include roads, schools, community centers and many more. The good thing about these bonds is that are generally exempt from taxes on the interest they earn and your investment is providing worthwhile services to the community.
What is a secondary Bond Market- These investments are secure, possible to the same extend that the agency ones are.
Corporate bonds are issued by private companies to raise cash. These bonds are not as safe as the government bonds ones, so they will normally offer higher returns to make them more attractive to invest in. The zero-coupon bonds offer no interest (or coupons). You may think well why would you invest in these?
The reason is that these are sold at a significant discount to what they are valued at. This means when they mature you get the value price when you sell them not what you paid for them, which can mean a huge profit to you.
The final type is very well known, it is the Covered bonds. Another type is Green Bonds, Green bonds in India are earmarked to raise money for climate and environmental projects. Covered Bonds in India is issued by a local government or one of their agencies to finance public projects like parks, roads etc. Types of Bonds in India is only those who are willing to take the high risk of losing everything, with the chance to get high returns instead.
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