Why need to Invest in government Bonds
Issued by the Indian government’s National Savings and Investments scheme, bonds is an easy and secure method to save money along with a chance of winning tax-free bonds in india. It ensures investors that their capital stays 100% safe. Generally, there are two types of bonds in india now we discuss — Government Bonds in india & Corporate Bonds in india.
A bondholder invests money to buy bonds in the government. Instead of paying interest to bond holders, the government pays money into a prize fund and provides the bondholder a chance to win tax-free prizes. Bonds in India cannot be maintained in joint names and are not transferable to another individual. Among the great advantages is that all or a part of bonds can be cashed any time you want.
A person can buy the bond online through Bonds India, a best bond platform in India. The bonds are typically sold in multiples of often. A person investing in this kind of bond has to make a minimum investment of 10000. However, the investment in bonds in india can go as high as 1,00,000. Anyone who is 18 years or more are eligible for making investment in bonds. Nevertheless, in case of children and people below 16 years, Bonds are normally bought by their guardians or parents.
Government Bonds in india are subject to credit risk. That means that the investment in government bond is only valid as long as the company that issued it can pay the interest and the par value back. Just like a loan from a bank there is always the risk that it won’t be paid back. You can
Secondly, Secondary bonds Market are subject to inflation risk. Inflation is the annual increase in the costs of goods coupled with the decreasing value of the dollar. In other words our $1 won’t buy next year what it will buy government bonds this year. The average inflation rate over the last 50 years is 3–4%. So, if we are earning6% on a bond and inflation is 3, then after few years we start to lose value on the money because our primary investment does not grow.
While bonds investment are great for income during retirement over time we lose the buying power essential to keep up a cost of living. Bonds should be a part of your portfolio whether they are in your mutual funds or you own them directly. The crucial thing is to understand the their role and their risks.
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