How can I invest in the bond market in India?

The bond market of India has various types of instruments that can be used as investment options. There are different instruments for personal and commercial purposes, and investors can choose the one that suits them best. Since the market is becoming so attractive among millennial investors, does it scare you to invest? Well, they’re not as complicated as you might think.

We got answers to the most common questions:

What is a bond?

A bond is a type of security debt that is issued by an authorized body like a company or financial institution. In return, you can expect a fixed return against the bond issued.

Why should you invest in bonds?

Bonds investments are a great source of revenue that is effectively foreseeable, and most of the time, bonds’ interest payout is twice a year. If a bondholder keeps the bond till maturity, they get the whole principal sum, making this an ideal method to protect one’s capital.

How to invest in bonds?

There are three ways to do it:

Buy from a broker

Since bonds aren’t traded publicly, you must take the help of a brokerage platform that allows you to buy and sell them against a nominal brokerage fee. Look for investors who are offering a discount on the face value of bonds that you can redeem at par later.

Through an Exchange-Traded Fund (ETF)

ETFs usually purchase bonds from different companies from where you can pick as per your requirement. It is suitable for those looking for fixed returns at low risk.

Directly from the Government

Government-traded bonds are issued for higher denominations, but they are the safest investment options as they carry a sovereign guarantee. These bonds are issued by Government authorities through RBI.

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