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New Delhi. If the 6-7% interest you get from a bank’s fixed deposit (FD) is starting to seem a bit dull to you, then corporate bonds might become a new option for you. After all, who wouldn’t want annual returns of up to 14%? It sounds like a sure deal but the real game lies here. Because where the profit is high, the risk also increases in the same proportion. Corporate bonds are one such investment option, which promises high interest in a short period of time, but there are many conditions and risks hidden behind them.
Corporate bonds generally offer higher interest rates than fixed deposits and also allow companies to raise capital for growth. These bonds are issued under the rules of the Securities and Exchange Board of India (SEBI), due to which they can be trusted to some extent.
Higher returns than FD, but also some risk
According to market experts, the corporate bond market has grown 10 times after 2020. Many companies are now offering 9 percent to 14 percent annual interest. But keep in mind that with higher returns also comes higher risk. It is important to check aspects like the financial position of the company, its credit rating and the guarantee of the bond before investing.
- Keep in mind the rating and duration.
- The security of a corporate bond depends on its credit rating.
- AAA rating is considered the safest.
- D rating indicates default (non-refund).
- Bonds with short tenure (1 to 5 years) have less risk and better returns.
Do research before investing
Investing in corporate bonds can be done online through SEBI-registered platforms like Grip, Wint Wealth. These platforms charge fees of 1% or more. Experts recommend that you consult a financial advisor before investing, because wrong selection can increase the risk of loss or fraud.
