The Astonishing Benefits of Investing In Bonds

When we discuss the term investment, the first thing that comes to our mind is putting money into the stock market. However, it comes with various challenges and risks along with higher returns. On the other hand, some bonds are considered as one of the best investments as it aids in getting stable dividend over some time with limited risks. All you need is the right strategy & smart mind while investing in any bond. The major benefit of the bond is security & safety. Note down, investors don’t want to miss out on bonds like UPPCL bonds or similar options in their portfolios. 

In this write-up, we’ll discuss what bonds are, how to invest in them, their benefits, and what kinds of risks are associated with them when you invest in them. Let’s find out the answers to all these questions. 

What is the Meaning of Bond In Simple Words?

A bond is nothing but a kind of loan to the government or company that further pays a fixed rate of interest to investors over a specific period. Let’s comprehend this term more simply.

Have you ever borrowed money? Of course yes, the majority of people borrow money at some stage in their life. Right? Similarly, several companies require some funds for business expansion, technological updation of processes, building infrastructure as well as social programs. In some cases, the money needed can be more than the limit the banks can offer. Henceforth, the concept of bonds comes into play. These entities issue bonds to the public market to raise funding, and potential investors aid in raising money via lending some amount of money to the company. 

Simply, bonds are the same as loans, and the investor is the lender. The company that sells the bonds is considered an issuer and bonds can also be considered IOUs that issuer to a lender who is again the investor.

There are different kinds of bonds available in the market. 

Government bonds: These are kinds of bonds that are issued directly by the government. However, they are a bit secure as they have full government support and have quite low interest. 

Corporate bonds: Private companies issue corporate bonds, and they can be further classified into secured & unsecured bonds based on the risk involved. 

Tax saving bonds: Indian government issues the tax-saving bond also called tax-free saving bonds, and in this bond, the holder also gets a tax benefit under the Income Tax Act. However, these bonds have a lock-in period that one should take into consideration. 

Capital Gain Bonds: These are also called 54EC bonds and are issued by the government of India to facilitate people to get the tax exemption under section 54EC on the long-term capital gains. The bonds are issued by infrastructure organisations like Indian Railways, NHAI, Power Grid, and others backed by the government. 

Final Words

Among other investment options, investing in bonds is a bit safer, and it comes with a steady earning option. The issuer pays interest on the face value amount for a fixed period as per the interest mentioned at the time of issuing the bonds. Investing in government-backed bonds can help as they are less riskier than other private bonds. For Example- you can check the UPPCL bond price & invest in it.  

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