Safety of capital is always first priority while investing hence Bonds ,Bank and NBFC Fixed Deposit schemes have always been attractive options as they are regulated by the rules laid down by the Reserve Bank of India.
Bank & PO Term Deposits
- Ideal saving instrument for people seeking fixed returns
- Minimum risk
- Low Returns
- Not Tax and inflation efficient
Corporate Fixed Deposits
- May offer a higher rate of return than normal bank deposits
- Can be supplement for regular income
NBFC / Housing Finance Cos FDs
- Are FDs launched by non-banking financial companies (NBFCs)
- They offer a higher rate of return than bank fixed deposits
- Are a good option for investors seeking fixed returns.
- The idea is to very well-established and high-quality ones even if they offer returns much lower than the average.
Corporate FD Basics You must know
- Post Tax Return
- Security of Principal
- Default risk if Any
- Terms for Pre-closure of Deposits
- Track record of company
- Diversify instead of investing in one company FD
Bonds can be considered a good investment product for investors who want to invest for a short-term. Bonds are generally considered a less risky investment compared to equity.
Mainly there are two types of bonds-Government & corporate bonds
Issued by a corporation to raise capital
They are safer than Equities
Generate specified returns at the maturity period
short-term if the maturity is less than five years; intermediate is five to 12 years & long-term is over 12 years
Higher yields than government securities
These bonds can be of two types.
- Convertible bonds: They can be converted into a pre-defined number of stocks as and when required by the investor.
- Non-Convertible bonds: Non-convertible bonds are just plain bonds.
Tax free Bonds
Any interest earned from tax-free bonds is exempt from tax
Ideal for large investment amount
Popular with High net worth investors
The tenure of these bonds is usually 10/15 or even 20 years
The bonds are secured, redeemable & non-convertible in nature.
Bond Basics –You must know
- Maturity date and term Does it suit your financial needs?
- Interest rates you will be paid interest at a fixed rate or a floating rate?
- Interest payments Will the frequency of interest payments meet your income needs?
- Financial capacity Of Company will it be able to pay you interest and return your principal at maturity?
- Market value How the changes in its market value affect your investments
- Security and ranking Is your principal secure if company can't pay its debts?
- Investment risks Have you thought about the risks associated & are willing to accept?