Corporate bonds are getting an increasing number of investments by Indian investors seeking reliable returns at relatively reduced risk as compared to equities. Although government bonds may be regarded as safe, corporate bonds investment have a better interest rate and can greatly boost your investment portfolio upon making a good selection of them. Nevertheless, investing in corporate bonds in India requires the right stock broker to be chosen. This article will take you through the investment in corporate bonds, the need to consider and the top stock brokers to enable you to start.
Corporate bonds are described as bonds issued by companies.Corporate Bonds Explanation.
Corporate bonds are debts that companies raise to finance their growth, operations or any other business endeavour. In investing in a corporate bond, you are in effect lending money to the company which issues it with the promise to pay interest (periodically or at given time in form of coupon payments) and also the amount of money on maturity.
Key Features:
Fixed Returns: The majority of the corporate bonds offer fixed interest, and this makes them appealing to the conservative investors.
Credit Ratings: To determine the financial health of issuers, credit rating agencies (such as CRISIL, ICRA, CARE) rate the bond. and the bonds with higher ratings are safer but might not have so high returns.
Liquidity: The corporate bonds are traded in stock markets, but the liquidity may differ depending on the issuer and the market.
Tenure: Corporate bonds are available with various maturity behind either short term (1-3 years) and long term (5-10 years or even more).
Reasons to Invest in Corporate Bonds.
There are a number of benefits in investing in corporate bonds:
Better interests than Bank FDs: Corporate bonds are generally good in terms of interest rates compared to the bank fixed deposits.
Portfolio Diversify: Bonding your portfolio will lower the total portfolio risk.
Regular Income: coupon pays allow steady income and this is highly beneficial to retirees or conservative investor.
Tax Efficiency: Some bonds such as tax-free bonds which are issued by government supported firms provide tax incentives under this section of 10 of the Income Tax Act.
It should be noted, however, that corporate bonds also contain a credit risk the risk that the business will not pay interest or repay money at all. Therefore, it is important to choose the correct bond and broker.
Investment in Corporate Bonds in India.
There is now an ease of investing in corporate bond in India through online trading and simplified services offered by stock brokers. Here are the steps:
Open a Demat and Trading Account: To invest in bonds, you require a Demat account of a registered stock broker.
Research Bonds: Evaluate the credit rating, interest rate, period of tenure and previous financial performance of the company.
Make an Order: Buy corporate bonds through the trading platform of your broker by stock exchanges or subscribe to new issues of bonds.
Monitor Investments: Track the interest payments and maturity date and check the financial health of the company after some time.
Best Stock Brokers in India in Corporate Bonds.
The choice of the stock broker is essential in order to have access to the corporate bonds. The following are the best brokers in India:
Zerodha: Zerodha is a low-commission financier and user-friendly business that enables investors to buy corporate bonds in exchanges. It is user-friendly and it can be used by novices.
ICICI Direct: Full service broker with extensive product offerings such as bonds, research services and financial advice. ICICI Direct is the right place where an investor wants advice as well as investment opportunities.
HDFC Securities: Specializes in providing full services regarding the investment of corporate bonds such as research services and online trading. The site is easy to navigate and customer service is competent.
Angel One: Gives access to corporate bonds and fixed-income securities at competitive rates in terms of brokerage. Angel One has a platform that is strong and can accommodate both the new and experienced investors.
Axis Direct: Provides a large portfolio of corporate bonds, research services and advisory services. The banking service is connected to the platform making it convenient to the Axis Bank customers.
The fee that the broker charges, ease of use, research support, customer service, and the range of bonds offered are some of the factors to be considered when deciding on the choice of a broker.
Investment tips on Corporate Bond.
Check Credit Ratings: Bonds with high credit ratings (AAA or AA) should be preferred in order to reduce the risk of default.
Diversify: Do not spend all your money in one company. Diversify through various bonds and industries.
Learn about Taxes: You have to pay taxes on interest that you get on bonds. This is to factor in to your expected returns.
Keep in touch: keep track of the profitability of the company and the market to prevent any surprises.
Corporate Bonds Investment in India: FAQs.
Q1. Do new entrants invest in corporate bonds?
Yes, amateurs may invest in company bonds. With the aid of a good stock broker, it becomes easier. Begin with bonds rated highly and diversify your portfolio slowly.
Q2. Are corporate bonds more secure than stocks?
Stocks are usually not as safe as corporate bonds since they provide fixed returns and first lien in a liquidation. Yet, they are riskier compared to government bonds because they have possibilities of credit defaults.
Q3. How much is the minimum investment in the corporate bonds?
The lowest amount of investment varies according to the type of bonds and the issuer. In the majority of retail bonds, it varies between 10000 and 100000 per bond. It is important to make sure to check the bond prospectus prior to investing.
Q4. What is the way I can make returns on the bonds of companies?
Returns are in the form of coupon interest payments and in some of the cases, capital gains as in case you sell the bond at a higher price as compared to buying.
Q5. What is the most appropriate broker to invest in corporate bonds in India?
The best brokers are Zerodha, ICICI Direct, HDFC Securities, Angel One and Axis Direct. The selection is based on the cost of the brokerage, the usefulness of the platforms, and research assistance.
Q6. Is it possible to trade corporate bonds prior to their maturity?
Corporate bonds may be traded in the stock exchange prior to maturity however liquidity may not be guaranteed. The prices vary depending on the interest rates and the market.
Conclusion
Corporate bonds should be included in any investment portfolio, providing a fixed return and comparatively less risk as compared to equities. Choosing the appropriate corporate bonds and a credible best stock brokers in india is important in order to get the maximum returns and risk minimization. The web-based platforms such as Zerodha, ICICI Direct, and HDFC Securities have simplified the process of entry by beginners and seasoned investors into this line of investment in a manner never seen before. Through appropriate research on bonds, investment tracking, and diversification, you should be able to make corporate bonds an important part of your financial development plan.
Leave a Reply