How to invest their income to get good returns is a question that often runs in people’s minds. Nowadays, there are so many investment options that it is a bit difficult to choose the right one. But if you want good returns with low risk, bonds are a good choice for you. Bonds are a source of fixed income. By this, the issuer pays interest on the principal amount or face value of the bond at maturity. You can invest your money in government and corporate bonds. A bond can be said to be a loan in a way. Governments and corporates issue bonds to raise debt. Companies decide the validity and annual interest coupon of the bond before issuing it. In this way it can be understood that if a company needs a loan for business, it decides to borrow through bonds instead of borrowing from a bank. Bonds can be bought in two ways. Primary Market and Secondary Market.
How many types of bands are there?
To invest in bonds, you need to know the bond market. There are two types of bond markets. Primary Market and Secondary Market. In the primary market, the issuer sells new debt securities to direct investors.
In convertible bonds, the buyer can convert the bond into shares of the issuer. Conventional convertible debentures, mandatory convertible debentures and inverse convertible debentures come under convertible debentures. With this bond, the investor gets a fixed rate of interest on maturity and face value.
Fixed rate band
A fixed rate bond is a government bond. In this bond, the investor gets a fixed interest during the maturity period. Market ups and downs do not affect their interest rate.
Floating rate bar
Terminal changes in these bonds affect the rate of return. While investing in floating rate bonds, the benchmark rate, the spread, the amount of shift above the benchmark rate and the reset frequency should be kept in mind.
A zero coupon bond
The investor does not earn much interest in these bonds. You get back the difference between the discounted price it was offered and the redemption value.
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Invest like this
You can buy the band online. You can invest in government securities by opening a retail direct gilt account through RBI’s retail direct facility platform (https://rbiretaildirect.org.in). KYC related documents are required to open Retail Live Guild account. You must have an email ID and a bank account.