Not everyone who wants to invest might be an aggressive investor. Thankfully today, the market offers you various options and you have the freedom to choose what best suits your risk appetite and your financial goals. If you are someone who is on the lookout for some safe schemes to invest for a long term, then you can consider bonds.
In today’s unpredictable market, you may want to invest a portion of your portfolio in some safe and more stable assets. You might have come across bonds and debentures when on this hunt. While often used synonymously, there is a difference between bond and debenture.
Bonds are a form of debt issued by private companies or governments, supported by physical assets or collateral. On the other hand, debentures are debt instruments issued by private companies to generate funds, but they do not have the backing of physical assets or collateral.
What are the Different Types of Bonds?
Now that you know the difference between bond and debenture, let us take a look at the different types of bonds that you can invest in.
1. Municipal Bonds
Sometimes local and state governments release bonds to raise capital for infrastructural development such as hospitals, highways, schools etc. Exempted from tax, municipal bonds are available in the form of short-term and long-term maturities.
2. Government Bonds
Issued by the State and the Central government, government bonds are managed and regulated by the Reserve Bank of India. Needless to say, such bonds enjoy a premium status in the investment industry. It denotes the issuing body’s liability to repay.
3. Corporate Bonds
As the name suggests, corporate bonds are the ones that are issued by privately owned companies or business conglomerates. Depending on the company, the bonds could be Secured Bonds and Unsecured Bonds. The aim is to raise funds at a lower rate of interest. Typically, corporate bonds are considered to be better paying than government bonds, however, this depends on the creditworthiness of the company and the market conditions.
4. Floating Rate Bonds
In floating rate bonds, interest rates are regularly adjusted. This happens in accordance with RBI repo rates. Market fluctuations can thus affect the returns on these bonds.
5. Inflation-Protected Bonds
These bond finance, as the name suggests, are designed to protect investors from inflation. The fixed interest rate, which is revised regularly reflects the changes in the CPI, Consumer Price Index.
Bonds to Consider for Long-term Investment in 2024
Listed below are some of the bonds that have been quite sought after.
Over To You
Bonds are like the sturdy, sensible option of the investment world—generally reliable, with the added cushion of physical assets or collateral. But remember, even the safest bets have their wild cards. Every investment carries some risk, so before you commit, it’s wise to dive deep into the pros and cons. A little caution now can save a lot of stress later!
