Investing in bonds involves lending money to an entity, whether it’s a government or a corporation, for a fixed period at a predetermined interest rate.
Advantages of investing in bonds include the potential for relatively high-interest rates. However, there are disadvantages to consider, such as the absence of absolute security, and the interest earned on these investments is subject to taxation. Therefore, it’s essential for potential bond investors to thoroughly assess the credibility of the company issuing the bond and examine the company’s past financial performance before making an investment.
For instance, the 7.15% RBI bonds, issued by the Reserve Bank of India, offer a 7.15% interest rate, paid semi-annually, with both cumulative and non-cumulative options available, and a six-year tenure. The primary advantages of investing in these bonds are safety and guaranteed returns. The interest earned is taxable.
