What are Bonds?
Bonds are debt instruments issued by companies or governments to raise capital. When you buy a bond, you are essentially lending money to the issuer. In return, the issuer promises to pay you a fixed or variable rate of interest periodically and to repay the principal amount at maturity.
Bonds have become increasingly popular among investors due to their ability to provide stable returns with relatively lower volatility compared to equity markets. They are an important component of a diversified investment portfolio, especially for risk-averse investors seeking predictable income.
There are various types of bonds available in India, including Government Securities (G-Secs), Tax-Free Bonds, RBI Floating Rate Savings Bonds, Corporate Bonds, and Non-Convertible Debentures (NCDs). Each type carries different risk-return profiles, and selection should be based on the investor's financial goals and risk appetite.