Bonds are basically a way for companies & governments for issuing capital for expansion, infrastructural projects, etc. By issuing bonds to the public, the organizations & Government can raise money for their projects. In simple terms bonds are like a loan for which you are the lender. The organization who sells the bonds is known as issuer & the holder is called as an investor. The bonds usually have a defined term or maturity, upon which the bonds can be redeemed.
Features
Diversification:
Investment in fixed income securities counterbalances high-risk investments in a portfolio and serves to even out returns in times of volatility.
Fixed returns:
They offer a potentially attractive and regular income avenue as the rate of interest is fixed (in most cases but not all) till maturity.
YTM (Yield to Maturity):
By investing in bonds and holding them till redemption, you can earn maximum returns in the form of regular interest plus the face value amount on maturity.
Protect from volatility:
While fixed income securities generally do not offer the high returns potential of other investments, you are spared from the volatility common in other markets as its price fluctuation is relatively lesser than equity stocks.
Liquidity:
Fixed income securities provide the flexibility and liquidity required to construct a portfolio customized to your specific investment objective. If required, low-risk fixed income instruments like government bonds can be sold at short notice.
Lower Risk:
Fixed income securities represent a loan from investors. As these investors are creditors to the company, in the eventuality of the company being winded down, they have priority over shareholders.
Investment in fixed income securities counterbalances high-risk investments in a portfolio and serves to even out returns in times of volatility.
Fixed returns:
They offer a potentially attractive and regular income avenue as the rate of interest is fixed (in most cases but not all) till maturity.
YTM (Yield to Maturity):
By investing in bonds and holding them till redemption, you can earn maximum returns in the form of regular interest plus the face value amount on maturity.
Protect from volatility:
While fixed income securities generally do not offer the high returns potential of other investments, you are spared from the volatility common in other markets as its price fluctuation is relatively lesser than equity stocks.
Liquidity:
Fixed income securities provide the flexibility and liquidity required to construct a portfolio customized to your specific investment objective. If required, low-risk fixed income instruments like government bonds can be sold at short notice.
Lower Risk:
Fixed income securities represent a loan from investors. As these investors are creditors to the company, in the eventuality of the company being winded down, they have priority over shareholders.