BONDS / Fixed Deposit

BONDS

What are bond?

Just as people need money so do companies and government. A company need funds to expand into new avenues. Similarly government require money for lots of social welfare work. Therefore the solution is to raise the money through bonds. A bond is nothing more than a loan for which you are the lender.

A bond is a debt instrument, in which the issuer – company, financial institution, or Government, offers regular or fixed payment of interest in return for the money borrowed by the said issuer. It is for a certain period of time.

Every investor desires to earn returns on its idle funds and at the same time wants the principle to be secured. The issuer of a bond must pay the investor something extra for the privilege of using their money. This extra is interest payments which are made at predetermined rate and schedule. This interest rate is referred as Coupon.

For example, Say you buy a bond with a face value of Rs.1000 a coupon of 9% and maturity of 10 years .This mean a you will receive a total of 90 (1000*9%) of interest per year for the next 10 years. When the bond matures after a decade you will get your Rs. 1000 back.

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How do bonds work?

How are bonds different from stock/Equity?

Bonds are debt, whereas Stocks are equity. This is important difference between the two equity. By purchasing stocks an investor becomes an owner in a corporation where as by purchasing Debt (Bonds) an investor becomes a creditor to the corporation or government. Basic advantage of being a creditor is that you have a higher claim on assets than the shareholders do. So difference are jotted down below.

Securities investments are subject to risks. Please read the Offer Document/Prospectus, the issue terms and conditions, carefully before taking any investment decision.

What is a tax-free bond?

Why these bonds are called "tax-free "?

Who provides tax-free bonds?

How do tax-free bonds work?

Let’s look at an example to understand this well.

Amount invested (10 Years) Rate of interest per year Total amount of interest per year Interest received annually
Rs.1,00,000 7.5% Rs.7,500 Rs. 7,500

Though the interest received from these bonds is non-taxable, any profits derived by selling these bonds in the secondary market are liable to taxes.

Who is eligible to invest in tax-free bonds?

How does one invest in tax-free bonds?

Why invest in tax-free bonds?

Salient Features:

Eligibility for Investment

Portfolio Management Services (PMS)

Portfolio Management Services (PMS) is an investment portfolio in stocks, fixed income, debt, cash, structured products and other individual securities, managed by a professionals that can potentially be customized to meet specific investment objectives.

When someone invest in PMS, He/She owns individual securities unlike a mutual fund investor, who owns units of the entire fund. They have the freedom and flexibility to tailor your portfolio to address personal preferences and financial goals. Although portfolio managers may oversee hundreds of portfolios, your account may be unique.

Investment Management Solutions in Portfolio Management Services

Discretionary: With this service, the investment choices rests exclusive with the Portfolio Manager.

PMS gives investors access to an institutional process of money management

Customized solutions by matching the unique needs and objectives of each investor

Effective diversification helps reduce portfolio volatility and enhances risk‐adjusted returns over long term

Who can offer PMS?

PMS can be offered only by entities having specific SEBI registration for rendering portfolio management services. Currently in India PMS is offered primarily by asset management companies (AMCs) and brokerage houses.

Who is an ideal PMS investor?

The Investment solutions provided by PMS cater to a niche segment of clients. The clients can be Individuals or Institutions entities with high net worth. Ideal for investors who: