Unlock up to 12% returns with INR bonds

Bonds fall into the category of low-risk securities just like Fixed Deposits. Below are some of the risks associated with investing in bonds:

• Default risk: The loss that an investor faces when issuer defaults(fail to return principal amount or Interest payments or both
• Liquidity risk: This loss comes into picture only when an investor wants to sell bonds before maturity. This loss is incurred by the investor when he/she finds no buyer for their bonds and hence sells them at a discount.
• Interest-rate Risk: If interest rates increase, the price of the Bond decreases. At this time, the investor wants to sell the bonds he/she has to sell at a discount price. However, the flip side is that, if the interest rates in the economy decrease, bonds’ selling price will increase. At such a time, an investor can make capital gains by selling his bonds at a premium to his buy price.

Bonds are 100% tradable securities. This means that there is no lock-in on your bond investment. If you want to sell them before maturity, you can do so in the secondary market at market price(market price may vary from par-value).

Bond ratings are evaluations of the creditworthiness of a bond. Higher ratings mean lower risk and greater creditworthiness. Ratings are expressed as letter grades or alphanumeric codes, with AAA being the highest rating. Investors use these ratings to assess the risk and potential returns of a bond investment.

These ratings are assigned by rating agencies and indicate the level of risk associated with the bond. There are a total of seven credit agencies in India viz, CRISIL, CARE, ICRA, SMREA, Brickwork Rating, India Rating and Research Pvt.

To invest in bonds, you need:

• Pan card
• Aadhaar card
• Bank account
• A DEMAT account. In case you don’t have one, you can create one online before the purchase.

The yield to maturity is the total return expected from a bond if it is held to maturity. In other words, it is the internal rate of return (IRR) of a bond if the investor holds the bond until maturity, and if all payments are made as per schedule.