Governments and companies often raise money from investors by issuing bonds that offer a fixed rate of interest for a pre-determined period.
Bonds are often regarded as a safe debt investment, making them a favourite among conservative and risk-averse investors. Those who have a healthy equity portfolio also look at bonds to diversify and reduce risk. In India, bonds are offered by municipalities as well as state and national governments to raise funds for various kinds of infrastructure and social projects. Private and public companies looking at expansion also raise funds through bonds.
Karvy Private Wealth enables clients to choose from a wide range of bonds, including PSU Bonds, Tax-Free Bonds, Infrastructure Bonds and Corporate Bonds.
- PSU bonds: Public Sector Undertakings (PSUs), also known as government debt bonds are the safest kind of debt bonds in India as the Indian Government backs them. They typically consist of medium to long-term instruments of debt which are directly issued by the government. Most PSU bonds are sold on a private placement basis at interest rates determined by the market. PSU bonds are ideal for the conservative investor and offer lower rates of interest.
- Corporate Bonds: Karvy Private Wealth provides you with the opportunity to invest in various corporations through corporate bonds. These bonds and come with wide range of tenors, which are usually up to 15 years. As compared to PSU bonds, corporate debt bonds are typically exposed to higher credit risk and volatility. Since they are riskier than PSU bonds, corporate bondholders receive higher yields for their investment. Corporate bonds are ideal for investors with moderate risk appetites, who are looking to earn regular income and growth
- Tax-free bonds: Tax-free bonds are great for those in the highest tax bracket and wish to save taxes on their interest income. These bonds are issued by the government and offer a better post tax yield than other fixed income instruments. These bonds are considered extremely safe and have a low risk of default.
- Infrastructure bonds: Public sector companies in the infrastructure sector often issue bonds to fund their expansion. These bonds have long tenures (10-15 years usually) and offer tax benefits under section 80c.
Benefits of investing in debt bonds
Investing in bonds through Karvy Private Wealth comes with a host of benefits:
- Diversify your portfolio beyond equity to mitigate risk
- Get better yields with a diverse selection of bonds
- Earn higher post-tax returns than other fixed income investments
- Reduce your tax burdens
- The interest rate on bonds remains fixed throughout the investment period, and your principal is returned in full when the bond matures subject to default risk.
Karvy Private Wealth enables you to invest in any of the bonds mentioned above easily. Our group company Karvy Investment Advisory Services Limited [KIASL] helps you find the right kind of bonds that suit your financial requirements.