Creating a Bond Portfolio: Here’s How You Can Buy Bonds in India?
Bond investment can be a great way for portfolio diversification and to get assured returns. You can put your money in corporate bonds, municipal bonds and government bonds to create a diversified bond portfolio. When you buy bonds, you lend money to the institution or government issuing them, who give you interest in return. Here's how you can buy bonds in India.
Bonds investment in India: Various routes
Some routes to buy bonds in India are:
- Through brokers
You can buy bonds directly through brokerage firms. Various brokerage firms facilitate bond transactions by connecting buyers with sellers. Through brokers, you can invest in corporate and government bonds. Once you place an order to buy bonds through your broker, they get credited into your Demat account within 1 to 2 days.
- Bond mutual funds
You can opt for bond mutual funds for bond investment in India. Bond mutual funds pool money from different investors and invest in various bonds. Managed by professionals, you can invest in bond mutual funds directly through an asset management company’s website or online investment platforms.
- Bond exchange-traded funds (ETFs)
While fund managers actively manage bond mutual funds, bond ETFs get traded on stock exchanges like individual shares. Bond ETFs are passively managed investments that track a correlating bond index. Bond ETFs are more liquid than traditional bonds as they are traded on stock exchanges like shares.
- RBI retail direct
If you want to buy government bonds, you can do so through RBI’s retail direct. The Reserve Bank of India (RBI) introduced the retail direct portal in 2021 to facilitate buying bonds and government securities (G-secs). Through the retail direct portal, you can buy G-secs in the primary market and also purchase and sell them in the secondary market.
Democratising bond investment, RBI’s retail direct portal offers a convenient and safe way to invest in government bonds. You can download the retail direct app on your phone from the Play Store (Android) or App Store (iOS).
Important things to keep in mind while buying the best bonds in India
For the best bonds to buy in India, there are certain things you need to keep in mind. These include:
- Checking the credit rating of the issuer. Ensure the issuer has a AAA rating or higher.
- Keeping a close watch on the prevailing interest rates. Bonds and interest rates move in opposite directions. In other words, they are inversely proportional to each other.
- Opting for a bond tenure that matches your financial goals. Bond tenures can range from a few months to years.
Wrapping it up
A solid bond portfolio can help you get assured returns on your investments and mitigate market volatility. With several types of bonds available and various ways to buy them, you can create a bond portfolio that meets your financial goals and fits into the overall scheme of things.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please read the SEBI-prescribed Combined Risk Disclosure Document before investing. Brokerage will not exceed SEBI’s prescribed limit.
