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There are many options available for investment in our country. Usually, people first focus on bank FDs for investment, where fixed and guaranteed returns are available. After bank FDs, people turn to mutual funds, where there is a high risk of fluctuations in the stock market. Bank FDs have low returns and low risk, while mutual funds have high returns and high risk.
Now here comes a big question do we have any such option where there is medium return and medium risk – i.e. higher return than FD and less risk than mutual funds? So the answer to this question is – yes. If you are looking for such an option for investment, where there is a higher return than FD and less risk than mutual funds, then the best option for you is – bonds.
What is a Bond
Bonds are a source of income with fixed returns. Apart from governments, private companies also issue bonds. When the government or a private company needs money, they issue bonds. These bonds come with a fixed return rate and fixed tenure.
Is it beneficial to invest in bonds?
Companies issuing bonds in India usually offer returns between 7 to 14 percent depending on their requirement. This is a fixed return offered by the companies, meaning you will get a fixed return on your investment. Statistics show that investors have received a return of 9 percent to 12 percent by investing in bonds. That is, you get a much better return on this than a bank FD.
Is it safe to invest in bonds?
In terms of risk, there are two types of bonds – secured bonds and unsecured bonds. Secured bonds are completely secure and investing in them is completely safe. Such bonds come with collateral. That is, the company mortgages something as security to repay the money it is taking from you, which can be seized in situations like default. Whereas unsecured bonds have a lot of risk because in this the company does not mortgage any of its things. If you are investing in an unsecured bond and that company defaults, then your money will be lost.
