Bonds Update: What are bonds? How safe is it to invest in them, how much return do you get..

Companies or businessmen need money to run their business. For this, they take loans from the market or arrange funds by selling their shares. Like companies, the government also needs funds to work. In such a situation, the government sometimes issues bonds for a particular project. If you are planning to invest in a place these days, where you get more returns than Fixed Deposit on investing. Along with this, there is also the benefit of tax exemption, then you can invest in government bonds.

Let's understand what bonds are. How safe is it to invest in it? How beneficial can they prove to be for us:-

What are bonds?

Bonds are instruments that give fixed returns. When governments or private companies want to raise funds, they issue bonds. In these, interest is given for a fixed period. The interest rates are higher than fixed deposits so people are attracted to it. After a fixed time, the investor gets back the money invested in this bond along with interest.

How much return can be obtained?
The companies issuing bonds usually give a return of 6 to 14%, which is fixed. This can be considered a very good return compared to FD and other savings schemes.

How safe is investing in it?

The interest on bonds issued by the government is slightly less, but the investors' money is completely safe in it. The government guarantees this.

The Government of India issues government bonds. Interest is paid on it from time to time till maturity. However, interest rates are also decided based on what the Reserve Bank has fixed the repo and reverse repo rates.

Broadly, the interest received on bonds is determined by the borrowing fiscal deficit. Except for zero coupon bonds, the interest rate is already fixed on every bond. In this sense, people only benefit from it.

If you fall in the high tax bracket and are planning to invest in FD these days, then tax-free bonds are a better option for you, because the returns from it are tax free.

What are the types of bonds?

Secured bonds: These bonds are considered completely safe. The company issuing them keeps some property as collateral. If the company defaults in payment, then investors can claim that mortgaged property.