Bonds
What are Bonds?
Bonds provide a predictable stream of income by paying interest twice a year. Bonds also help offset exposure to more volatile stock holdings.
Types of Bonds
Corporate Bonds
Corporate Bonds are issued by a company. In many cases, these companies issue bonds rather than seeking loans from a bank for debt financing because bond markets offer more favorable terms and lower interest rates. Corporate debt instruments with maturity shorter than one year are referred to as commercial papers. This instrument trade in decentralized and over the counter markets.
Municipal Bonds
Municipal Bonds are issued by states and municipalities. Some municipal bonds offer tax-free coupon income for investors. Typically, only investors in the highest tax brackets benefit from buying tax-exempt municipal bonds instead of taxable bonds. Municipal Bonds are a great way of safe investing. These are sometimes also known as local authority bonds or by other names.
Government Bonds
Government Bonds are issued by the Indian Treasury Department. Bonds issued by the Treasury with a year or less to maturity are called Bills. The entire category of bonds issued by a government treasury is often collectively referred to as treasuries. It generally includes a commitment to pay a periodic interest known as Coupon Payments and to repay its face value on the maturity date.
Agency Bonds
An agency bond is a security issued by a government-sponsored enterprise or by a federal government department other than the Treasury. Some are not fully guaranteed in the same way municipal bonds are. It is also known as agency debt. In the world of fixed-income securities, agency bonds are often compared with other investment options for their low risk and high liquidity.
Benefits of Bonds
Portfolio Diversification
Bonds enable efficient portfolio diversification and thus assist in portfolio risk- mitigation.
Low Market Volatility
Bonds carry a very low market volatility as compared to the prices of equity funds or mutual funds.
Less Market Risk
You can get a very low market risk when you start investing through Government Bonds.
High Priority Claims
Bond Investors can select a high priority claim to their assets over prefered stockholders.
Regular Income Stream
These Fixed-income securities are able to provide you a steady stream of income.
Principal Protection
Investors get benefitted by preserving and increasing their invested capital in bonds.
