Corporate bonds are debt securities issued by companies, NBFCs, or corporations referred as issuers.Corporate bonds offer fixed returns within a fixed tenure called yield to maturity (YTM).
Investors provide funds to the issuer, who offers fixed returns through periodic interest and principal payments, made monthly, quarterly, or semi-annually.
Independent agencies like CRISIL, ICRA, and CARE assess the issuer's financial health and assign credit ratings between AAA (highest) to D (lowest). A higher rating indicates a lower risk.
REASON AND BENEFITS
Consistent Income
Corporate bonds provide steady and fixed returns through fixed interest payments, making them a favourable choice for investors looking for a predictable income stream.
Accessible Investment
You can begin investing in corporate bonds with a minimum of just 1,000, offering a range of options to align with your financial goals and preferences.
Portfolio Diversification
Senior Secured Corporate Bonds are backed by credit ratings,offering a safer investment option that remains insulated from stock market volatility.
How to Invest?
- Look for Ratings: Independent agencies like CRISIL, ICRA, and CARE rate bonds based on the issuer’s financial health. Understand the Rating Scale: Ratings range from high (AAA) to low (D). Higher ratings mean lower risk but often lower returns, while lower-rated bonds carry higher risk and potential for higher returns.
- Secured vs. Unsecured Bonds: Secured bonds are backed by assets (collateral) which means, in case of a default, these assets can be used to repay investors. Unsecured bonds don’t have collateral and can be riskier. Check Collateral Value: For secured bonds, it’s good if the collateral value is higher than the loan amount, as it helps protect your investment.
- Short-Term vs. Long-Term Bonds: Bonds can range from short (12 months) to long-term (24+ months). Short-term bonds generally have lower yields and risk, while long-term bonds can offer higher returns but come with more uncertainty.
- Check the YTM: This is the total return you can expect if you hold the bond until it matures. It factors in both the coupon payments and any gain or loss if the bond was bought at a discount or premium.
For your knowledge
To help you
Frequently Asked Questions
Are the returns from corporate bonds guaranteed?
Can non-residents invest in corporate bonds on your platform?
How do I find corporate bonds to buy?
What happens if the issuing company of corporate bonds defaults?
Can I sell my corporate bonds before maturity?
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