Best Bonds/ NCD to Invest in India with Prakash72
To strengthen your portfolio’s risk-return profile, Bonds/NCD can create a more balanced portfolio by adding diversification and calming volatility. If you are looking to invest in Bonds/NCD go with Prakash72.
Features
Prevailing interest rates
Bond prices generally move in the opposite direction of prevailing interest rates. If interest rates are falling, Bond prices are generally rising. In a rising interest rate environment, Bond prices will generally fall.If you are looking to benefit from a trade, buy when the yield is high with the expectation to sell when it is low.
Age of the Bond
The longer the maturity, the larger the swing in price in relation to interest rate movements. In a period of rising rates and declining prices, the long-term Bond funds will decline in value more than intermediate-term and short-term Bonds.
Credit quality
Credit Rating is an important factor that affects the Bond prices and yields just like an individual wanting to get a loan, Bond issuers must generally pay higher interest rates if their credit rating is poor. Therefore Bond investors must ensure the credit quality of the issuer.
How it works?
There are two methods of buying a Bond.
- Primary (Directly from Issuer)
- Secondary (From the Secondary Market on Exchange)
Buyers need to be aware of two primary aspects, market price and yield. Market price is what is quoted on an exchange for buying or selling, and the yield shows what you earn every year by holding the Bond. The latter is calculated by dividing the annual coupon or interest rate by the market price. Stocks are bought with the expectation that price rise will lead to profits. In Bonds, however, the buy price is not always lower than the face value of the Bond that you get back at maturity. What really matters is the yield.
Bond prices rise when yields fall, and vice versa. For example, a Bond issued at Rs. 100 with a 10% coupon and maturity of 2 years is sold at the end of year 1 at Rs. 101. This is a yield of 9.9% and makes for 11% return (Rs. 1 on the price + Rs. 10 coupon). At the end of the next year, the buyer gets back Rs. 100 principal and Rs. 10 as coupon, but that is not a return of 10%, rather it is 9.9%, because you paid Rs. 101 to acquire the Bond. If you had bought when the yield was low, chances are you won’t be able to profit much as a rising yield means lower prices. If the trend is for yields to move lower, then the opposite is likely to occur.
Best Bonds to Buy in India
Investors can buy Bonds in India, various types of Bonds exist. For example: Tax Free Bonds – where the interest earned is tax free in the hands of investors, Capital Gain Bonds or 54EC Bonds which are the Fixed Income instruments that provide capital gains tax exemption under section 54EC to the investors, Corporate Bonds, GOI Bonds, etc. Also NCDs are of two types -Secured NCDs that are backed by the issuer company’s assets and Unsecured NCDs which are issued based on the creditworthiness of the issuer (not backed by the asset).
Aspects of National Pension Scheme
Advantages
Fixed Returns on Investment: Bonds are a fixed investment that pays out regular interest at regular times. Furthermore, when a Bond matures, you receive the principal amount deposited before.
Less Volatile: Although the value of a Bond might change depending on current interest rates or inflation rates, they are typically more stable than stocks. They are also less risky as compared to stocks.
Clear Ratings: Bonds, unlike Equities, are assessed by credit rating organisations globally. This reassures investors that now is the best moment to invest in Bonds. Credit Rating agencies provide good insights regarding particular Bonds.
Suitability
They can be good investments for those who are in or close to retirement as well as younger investors who seek a stable return. They are a safe and conservative investment which provide a predictable stream of income.
Taxation
Interest Income is added to an individual’s income and taxed accordingly. While Capital gain on Bond will be taxed at 20% along with indexation benefit after 1 year and as per income slab if sold within 1 year.
Is it safe to invest in Bonds
Bond investment in India are considered safe relative to equity investments but there are factors that should be checked in to understand the safety.
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Frequently Asked Questions (FAQs):
1. How to Invest with Prakash72?
Any investor can enjoy the benefits of investing through Prakash72 in the following easy steps:
- – Create an account in Prakash72 by providing your basic details. (If you already have an account then just login into your account)
- – On your portfolio page click on the Buy New tab at the right top corner of the screen.
- – Select the Bond scheme you want to purchase.
- – Your request will be generated and a relationship manager will get in touch with you for getting the investment done.
2. Is Bond a Good Investment?
Bonds provide Fixed Returns on Investment as well as they are less volatile and risky compared to stocks.Investors also have an exit option to sell certain Bonds on exchange.
3. Who can Invest in Bonds?
Any person resident of India is eligible provided with necessary documents and requirements.
4. Which Type of Bond is Safest in India?
Among all Bonds – Gsecs and AAA rated Bonds are considered safest in India.
5. Can I Withdraw the Bonds?
Yes, certain Bonds in the secondary market are traded on exchange and can be sold there, however it will depend on liquidity.