Everyone like the fixed income without much risk. But how it is possible to get better returns with less risk. Yes corporate bonds can help you to get this objective. How to invest and what is the returns on investment ?let’s explore this article for all the details about how to earn fixed income from Corporate bonds ?
What is Fixed income ?
Before going to understand about corporate bonds let’s understand what is fixed income first. Fixed income is a income that gives a predefined interest till the investment get matured. The investors continue to get returns at regular basis as per the terms and conditions of the scheme. After completion of the maturity period the principal amount also payed back to the investors. The most common type of fixed income instrument is government or corporate bonds.
What is Corporate bonds ?
When any corporate/ businesses/ Organization wants to raise money to grow their businesses or to raise capital or for any new acquisition then they issues debt securities, which is called as corporate bond.
In this process the corporate houses ask the investors to invest certain amount in order to buy their bonds. In returns the companies give them a pre-established interest. The interest can be fixed or variable depending upon the schemes terms and conditions.
03 things to consider before investing in corporate bonds
1. Credit rating
Investors must be sure about the bond they are going to invest. One of the simplest way to find a bond is good enough to invest is to check its credit rating, usually you will find the rating to be given on the platform you are investing. You can also check out about the company and it’s fundamental it will help you to know the future aspects of the company. This is how you can chose a good corporate bond for your investment.
2. Duration of the bond
The second important thing to look in a bond is to check the duration of the bond. By this you can identify how long you want to be invested. That is your short term investment or long term investment.
3. Coupon rate
This is the most important thing to check before investing in bonds. A bond with high coupon is high riskier then a bond with low coupon. It depends upon your risk appetite and due diligence that which one you chose. An A rated bond gives a return of 11- 12 % while an AA rated bond will give a return of 10 – 11 %.
Which platform you can use to invest in bonds ?
There is dedicated bond platforms gives you direct access to the bond markets such as indiabonds, wintwealth, goldenpi etc however you can use your own demat / investment platform to invest in the bonds if you want all your investment in one platform.
How policy change by SEBI can attract more investment in bonds ?
Bond is a great investment option for people who want fixed income other then FDs but due to the minimum investment requirement 10,0000 rupees the same was sidelined by many. However now the SEBI has changed it’s policy and made the minimum investment required to invest in bond is 10,000 rupees. Which will definitely help the retail investors to access into the bond market.
Conclusion
With the high volatility in the equity market bonds can give a great stability and diversification to your portfolio. People who want a fixed income without much worries about the market fluctuations, corporate bonds can be a great option for them. Always take advice of a financial adviser before investing in any financial instruments and read policy related documents carefully before any investment. You may ask your doubts in the comment section below, our team will try hard to answer your queries.