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4. Corporate Bonds

Corporate bonds are debt security instruments that companies issue to raise finance to cover their small expenditure such as advertising expenditure, salaries, inventory, and such other expenses. Investors earn through trading the bonds in the secondary market or the interest payment done by the corporation in the promised intervals. Typically. Corporate bonds in India yield a higher return to the investor compared to government securities as they are riskier than government securities, and higher the risk, higher the return. They raise money to start new projects and expand their activities.

For corporations, bonds are more beneficial than equity as shareholders don’t lose control or rights over the company to others when they need finance. It is a cheaper option than borrowing from banks as the interest rates are comparatively lower for corporate bonds. For the investors, corporate bonds are for shorter tenure compared to other investment options, which makes corporate bonds perfect if you are looking for an investment that gives returns in a short span of time. 

The risk factor of corporate bonds depends on the credit rating of the companies. If the credit rating of the said company is high, such a company’s bond will carry a lower interest rate, as they will be able to raise debt from the market easily. At the same time, a company with a low credit rating will have to provide high-interest rates to attract investors to invest in their company. So, you should create your portfolio after a proper risk assessment of the said portfolio. Invest should be diversified and balanced between risky corporate bonds of high credit-rated companies and low credit-rated companies so you can create balance in your portfolio of risk and return. 
 

If you plan to hold the bonds for more than one year, than you will be taxed long term capital gains u/s 112 Indian Income Tax of flat 20% on the other hand if there is short term capital gain you will be taxed under short term capital gain. Bonds are convertible and non-convertible, where the convertible bonds can be converted into stocks, so when you think stocks will be more profitable than you can convert them into stocks. The Non-convertible bonds can be never be converted into stocks; from the issue date till exit, you’ll not be able to convert it. 

LiquidTalk will help you create the best portfolio in India for corporate bonds to maximize the profit while still being in your capacity. Connect with us to get complete knowledge and analysis with appropriate statistics to help you invest in profitable bonds.