Bonds & NCD

Bonds and Non Convertible Debentures(NCD) are investment options for individuals looking for a fixed income with low risk. Both instruments offer a diversified portfolio to the investors and are a good option to include in the portfolio to offer stability.

Bonds

Bonds are debt securities floated by corporations or government entities to raise money from the public to fund their operations or projects. When you invest in bonds, you are actually lending money to the issuer of the bond generally at a fixed rate of interest and a fixed maturity period. Bonds are mostly secured and hence, safe investment bets.There are different kinds of bonds like Corporate Bonds, Government Bonds, Municipal Bonds, Tax free bonds, Floating rate bonds, Capital Gains bonds etc.

NCDs

Non Convertible Debentures are long term investment opportunities issued by companies to raise funds. The NCDs have no collateral and hence heavily dependent on the creditworthiness of the company. The credit scores of the company issuing the NCD should be considered before investing in such instruments. Even the NCDs are rated by the rating agencies. NCDs carry a fixed rate of interest and a fixed maturity period. The money is raised through a public issue. Subsequently, they are traded over the counter or on the exchange. Investors in NCDs should do a thorough check on the company that is issuing the debentures with a view to the reason that the funds are being raised. NCDs issued by high rated companies are generally safe and offer certain other benefits like tax exemptions at source and high liquidity as they are tradable on the stock exchange before they reach maturity.