Bonds and Non-convertible debentures (NCDs) are long-term financial instruments, issued by corporates to raise funds through public issue or private placement. They acknowledge a debt obligation towards the issuer and usually come with a fixed tenure. Interest on NCDs can be earned monthly, quarterly, annually or cumulatively.
- Investment in bonds / non-convertible debentures (NCD) are offered in both primary and secondary markets
- Investment in bonds and NCD offer a good opportunity to investors to earn regular income and diversify the investment portfolio.
- NCDs have higher liquidity as they can be traded on demand. Interest rates of bonds/NCDs are also a lot more stable and the issuer pays an interest “coupon” at pre-determined intervals.
- Bonds are given a rating or grade that indicates their credit quality. This measures a bond issuer’s ability to repay the invested capital and interest on time.
- The value of a bond is susceptible to change due to fluctuations of interest rate.
- NCDs in demat form come with no TDS.
- Diversification of investment in bonds from different issuers can lower investment risk.
Higher returns, liquidity, taxation benefits make investment in NCDs a suitable option. If an investor is looking for superior earning options to bank Fixed Deposit, then NCD investment is an option. NCDs from pvt companies carries issuer risk.