Best Online Bonds to Invest in India – Investor’s Guide
India is one of the nations where bonds are available in both physical and dematerialised forms, but mostly through online mechanisms for easy accessibility. This guide brings an insightful light into the investor by explaining the different bond types that an investor can invest in, the online processes of buying, and how applications like the Bajaj Broking app aid such works.
What are Bonds?
Bonds are almost marginal creditors. One buys such a bond for a specific time and creates a limited-time debt contract in which he/she lend money to the issuer. In turn, it pays interest at fixed date(s), and at maturity it pays the principal amount to the bondholder. Hence, because of this certain and predictable cash flow, bonds are known as fixed-return instruments generically.
Investments in Other Bonds in India Other than Those Mentioned Above
There is a huge range of bonds that are held by various investors in India. There are unique characteristics attached to each of them along with a specific risk-return profile.
Government Bonds
These are issued with the guarantee of the Government of India or a state government:
These are sovereign-backed: a return will be guaranteed.
G-Secs and Treasury Bills fall under them.
Corporate Bonds
Limited companies and public corporations sell to raise capital.
These coupon rates despite the credit rating of the issuer.
The high-rated companies earn lower yields than their lower-rated competitors.
Tax-Free Bonds
These are the government-backed institutions, such as NHAI, REC, or PFC.
Interest income in this case stands exempt from the income tax under Section 10 of the Income Tax Act.
Municipal Bonds
The bonds are issued by the municipal bodies for funding infrastructure projects.
They can be raised as public issues and through private placements.
Sovereign Gold Bonds (SGBs)
These are issued by the Reserve Bank of India (RBI) on behalf of the government.
These are denominated in grams of gold. Annual interest is payable.
Infrastructure Bonds
These are issued toward financing energy, transportation, and utilities projects.
Why Invest in Bonds Online?
This online mode of investment now enables easy accessibility to both issuing and secondary markets for investment. Other advantages include:
Convenience: Investors get the opportunity to view, compare, and purchase online bonds.
Transparency: A price, yield, and rating are available for consideration before making a purchase.
Variety: All government, corporate, and tax-free bonds are available in the same place.
Keeping Record: This results in easy tracking via direct credit of holdings to the Demat Account.
How to Invest in Bonds Online in India
Step 1: Open a Demat and Trading Account
For holding in bonds in electronic format, a Demat Account is mandatory, while a Trading account is required for executing transactions on exchanges.
Step 2: Select the Platform
Investors can choose the Bajaj Broking App, where they would get to see and invest in all the bonds available. These apps connect the market data with credit ratings and maturity details.
Step 3: Review About Bond
Before buying a particular bond, the investor has to consider the above:
Coupon rate
Maturity date
Credit rating of the issuer
Yield-to-Maturity (YTM)
Liquidity in the secondary market
Step 4: Place the Order
The orders are placed online through the app or trading platform, with the purchased bonds transferred to the buyer’s Demat account.
Step 5: Monitoring Investments
The online platform would monitor the holding of bonds, receipt of coupon payments, and culminating activities.
An Online Investment with the Bajaj Broking App towards Bonds:
Bajaj Broking App is an integrated application designed solely for investors in Bonds to invest in India and facilitate such functionalities.
Dedicated segment for bonds includes government, corporate, and tax-free bonds.
Live prices, yields, and credit ratings for bonds.
Integration through Demat and Trading Account for all trades.
Portfolio tracker that includes maturity schedules and coupon tracking.
Literary material elucidating different types of bonds.
Factors to Consider Before Choosing Bonds to Invest
Credit Rating
Rating by either CRISIL, ICRA, or CARE indicates the capacity of the issuer to pay.
Yield to Maturity (YTM)
Significantly describes the return expected when the bond is held until its maturity of bonds.
Liquidity
Some bonds have a huge activity in secondary markets, whereas others are liquid in smaller quantities.
Interest Rate Environment
Bond prices and prevailing interest rates are inversely related. Increasing interest rates would mean a decrease in the price of bonds.
Tenure
The shorter the period, the quicker the return on money, while, on the other hand, the longer the period, the more the funds are locked in.
Tax Implications
While interest income from tax-free bonds is exempted, taxable bonds would be taxed as per applicable slabs.
Conclusion
Bonds still constitute one of the major investments in India, offering fixed returns along with diversification. Digital platforms trail the investor last in identifying and accessing all types of Bonds into which one can invest. The Bajaj Broking App, of course to offer a well-defined method of investing in government, corporate, and tax-free bonds, complements that with trading and tracking options. Now that the investor understands the performance of bonds generally, their risk aspects, and the regulatory framework, he has positioned himself quite well to invest online in bonds.
