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What are Bonds?
Bonds are debt instruments issued by entities looking to raise funds for their financial needs. Bonds carry a fixed interest rate which is called the coupon rate or simply the coupon. This interest provides investors with returns on investments.
Why invest in Bonds?
Secured returns
Bonds offer a fixed rate of return on investment through the coupon rate. The interest is paid at regular intervals.
Diversification
Bonds are debt instruments that add stability to your portfolio and help diversify it.
Liquidity
Bonds are listed on the stock exchange making them liquid. You can trade them on the exchange before their maturity date.
Tax benefit
If you invest in tax-free bonds you can save on the tax outgo on the interest income earned from them.
Value Subscription Plans
Trade 20
₹20/order Brokerage fee
(A minimum brokerage of Rs.20 per executed order will be charged subject to a maximum of 2.5% of the traded value. If the brokerage levied as a percentage on the value of the shares/contract is less than the agreed brokerage payable per share/contract, you will be charged the minimum rate of brokerage per share instead of the percentage)
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Trade5
₹3999 + GST p.a. Brokerage fee
(A minimum brokerage of Rs.5 per executed order will be charged subject to a maximum of 2.5% of the traded value. If the brokerage levied as a percentage on the value of the shares/contract is less than the agreed brokerage payable per share/contract, you will be charged a minimum rate of brokerage per share instead of the percentage)
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Options
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Currency Futures
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Currency Options
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Commodity Futures
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Commodity Options
RM Plan
0.03%/order Brokerage fee
(A minimum brokerage of Rs.20 per executed order will be charged subject to a maximum of 2.5% of the traded value. If the brokerage levied as a percentage on the value of the shares/contract is less than the agreed brokerage payable per share/contract, you will be charged the minimum rate of brokerage per share instead of the percentage)
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Equity-Intraday
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Equity Delivery
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Commodity Futures
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Commodity Options
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₹35/lot Brokerage fee
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Account opening process is very simple and steps mentioned in the process are user friendly. Guidance wherever required is excellent and prompt.
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Panvel, India
My trading experience with ABM has been very fruitful. I have always been receiving excellent support from my dealer. Moreover, the transparent business practices at ABM makes it the preferred broker in the industry.
Aditya Birla Money Customer
Mumbai, India
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Table of Contents
What are bonds?
Bonds are debt instruments which are issued by entities eyeing to raise funds. They offer investors guaranteed returns in the form of interest payouts. Bonds are also listed on the stock exchange allowing investors the flexibility to trade them before their maturity dates.
What are the features of bonds?
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Bonds have a specified maturity date
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The coupon rate is the interest payable on bonds
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The face value of the bond represents its issue price
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You can buy and sell bonds through your Demat account
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You might also earn capital gains by selling bonds at a higher price
Who are the primary issuers of bonds?
- Government
- Municipal corporations
- Companies or corporations
What are the different types of bonds?
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Sovereign Gold Bonds
Bonds issued by the RBI against gold. It offers guaranteed returns and also helps you gain from the growth in gold price.
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Callable bonds
Bonds that can be redeemed before maturity at the issuer’s discretion.
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Puttable bonds
Bonds that can be redeemed before maturity at the investor’s discretion.
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Fixed-rate bonds
Bonds whose coupon rates remain fixed over the bond tenure.
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Corporate bonds
Bonds issued by companies are called corporate bonds.
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Zero-coupon bonds
Bonds that do not offer any interest but are issued at a discount and redeemed at face value.
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Asset-backed bonds
Bonds that are backed by an asset of the issuer and are safer than regular ones.
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Floating rate bonds
Bonds whose coupon rates change over the bond tenure.
How do bonds yield returns for investors?
Interest income
You get interest at the coupon rate at regular intervals during the bond tenure.
Capital gains
If you buy the bond at a lower price and sell at a higher price, you earn capital gains on the sale of the bond..
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Equity Funds for diversification
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Various equity funds
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Tax benefits on capital gains
FAQs on Bonds
Bonds are the financial instruments which are issued by government agencies, large corporations and financial institutions, secured by physical assets or collaterals whereas debentures are unsecured debt instruments issued by private or public companies with pre-specified terms and conditions without any collateral. Debentures are a type of bond. Any unsecured bond without collateral is a debenture. In that sense, all the bonds cannot be debentures, but all debentures are bonds.
Bond yield is the return on bond investment which an investor expects to earn each year over its term to maturity. Bond yield is the effective interest rate on bonds calculated by dividing the coupon amount by the price of the bond.
A Bond Certificate is a legal document provided to the investor at the time of purchase establishing the title of the Bondholder/investor to the Bonds specified therein. It states the face value, unique identification number for the bond certificate, name of the issuer, maturity date, interest rate and terms of the debt agreement.
Yield to Maturity (YTM) is the effective return you will get if you hold a bond till its maturity date. On the other hand, Yield to Call (YTC) is the effective return calculated on callable bonds until its callable date, when the issuer has the option to call back the bond.
Non-resident Indians (NRI) can invest in government securities (G-Secs), treasury bills (T-bills) and state development loans (SDLs) directly through the retail direct platform of the Reserve Bank of India.
NRIs cannot invest in sovereign gold bonds. However, if NRIs have already invested in these bonds before acquiring NRI status, they can hold it till maturity or early redemption.