![\"Rise](\"\/wp-content\/uploads\/2020\/10\/corporate-bond-investments-2.png\")
<\/figure>\n\n\n\n(Image\nsource: Livemint*)<\/p>\n\n\n\n
So, how different are corporate bonds from stocks?<\/strong><\/h2>\n\n\n\nAlthough\ncorporate bonds and stocks are both about investment in the capital markets,\nbonds are different from stocks. The latter are instruments of equity wherein\nthe investor has a stake in the company\u2019s ownership. Both stocks and bonds are\nraised by organisations that need to raise capital. However, bonds can be\nissued by governments, non-profits, corporations and any kind of entity. On the\nother hand, stocks can be issued by corporations, partnerships or sole\nproprietors of a company. While stocks can have a greater element of\nvolatility, bonds are fixed-income investments which are not as volatile. <\/p>\n\n\n\n
If\nyou are interested in the bond market, you can invest in two modes: by opting\nfor mutual funds that invest in bonds or by buying corporate bonds. If you are\nopting for corporate bonds you may look at buying in the primary issue or in\nthe secondary market. In the secondary market, there could be a problem of\nabsence of liquidity, which means you may not always get the bond you prefer.\nIn the primary issuance, there are bonds to suit any kind of wallet. The bonds\nin primary issuance come with different maturity dates and you can choose the\none that is apt for you. <\/p>\n\n\n\n
In\nthe secondary market, you would need to buy bonds through a third party, ie, a\nbroker. If you open a demat account, you can directly purchase bonds and don\u2019t\nhave to go through a broker. <\/p>\n\n\n\n
Additional Read:<\/strong> How to nvest in different asset\nclasses based on their risk<\/a>?<\/p>\n\n\n\nPoints to consider while investing in corporate bonds<\/strong><\/h2>\n\n\n\n \u2022 Yield: <\/h3>\n\n\n\n
This is one of the most important aspects while talking about corporate bond investments. It is the element you can use to compare a bond with another and decide which one to buy. But it is not a fixed measure because of changing interest rates. Therefore, there are two ways to measure yield: current and yield to maturity. The current yield is the yearly return on the amount you paid to buy a bond, irrespective of the maturity. The yield to maturity is the overall returns you will get if you were to hold that bond till it matures. <\/p>\n\n\n\n![\"Things](\"\/wp-content\/uploads\/2020\/10\/corporate-bond-investments-3.jpg\")
<\/figure>\n\n\n\n\u2022 Coupon:<\/h3>\n\n\n\n
When you buy bonds, the company makes interest payouts till the bond matures. This interest that the company gives is called the coupon. <\/p>\n\n\n\n
\u2022 Value: <\/h3>\n\n\n\n
The value of corporate bonds increases when interest rates dip and vice-versa. The longer the time to maturity, the greater the volatility in price. <\/p>\n\n\n\n
\u2022 Credit ratings:<\/h3>\n\n\n\n
The credit-worthiness of bonds matters a great deal while buying them. The ratings help investors assess the corporation or company\u2019s ability to repay debt. Ratings also help investors assess the credibility of the company that has issued the bond. These ratings are issued by agencies like CRISIL, CARE or ICRA. <\/p>\n\n\n\n
\u2022 Research:<\/h3>\n\n\n\n
Although credit agencies issue ratings, it is important to do your research on the companies that are offering bonds when you plan to buy corporate bonds per se rather than via mutual funds or exchange-traded funds that are corporate-bond oriented. Make sure you don\u2019t buy a corporate bond that may be at risk of a default. <\/p>\n\n\n\n
Types of corporate bonds<\/strong><\/h2>\n\n\n\n\u2022 Convertible bonds:<\/h3>\n\n\n\n
If you invest in convertible bonds, you get security alongside interest payments. These bonds could also be converted into shares of the company.<\/p>\n\n\n\n
\u2022 Zero coupon bonds:<\/h3>\n\n\n\n
Investing in this kind of bonds means there is no coupon payment but such bonds offer a high discount rate trade. <\/p>\n\n\n\n
\u2022 Strip bonds:<\/h3>\n\n\n\n
This is a type of bond wherein the interest and principal components are stripped and sold separately. Once the bond matures, the investor who has invested in the principal receives the amount equal to the face value of the bond while the investor who has bought coupons receives the coupon payment. <\/del><\/p>\n\n\n\n\u2022 Junk bonds:<\/h3>\n\n\n\n
These bonds come with high interest rates but also a greater risk. They are typically not rated high. <\/p>\n\n\n\n
Additional Read:<\/strong> Which Investment Option Is Best\nFor The Risk Averse Investor?<\/a><\/p>\n\n\n\nConclusion<\/strong><\/h2>\n\n\n\nBuying\ncorporate bonds comes with its own advantages. Bonds offer a steady income\nsource and offer diversification to your investment portfolio. They also offer\ngood yields at low risk and are flexible. You could pick corporate bonds on the\nbasis of your investment horizon, goals and risk profile. Look up Tata\nCapital\u2019s Wealth Management Solutions<\/a> for protecting and growing\nyour wealth with opportunities to invest in primary or secondary bonds. <\/p>\n","protected":false},"excerpt":{"rendered":"If you have just begun your investment journey, you may have heard of asset allocation and diversification of portfolios. <\/p>\n
Points to consider while investing in corporate bonds<\/strong><\/h2>\n\n\n\n \u2022 Yield: <\/h3>\n\n\n\n
This is one of the most important aspects while talking about corporate bond investments. It is the element you can use to compare a bond with another and decide which one to buy. But it is not a fixed measure because of changing interest rates. Therefore, there are two ways to measure yield: current and yield to maturity. The current yield is the yearly return on the amount you paid to buy a bond, irrespective of the maturity. The yield to maturity is the overall returns you will get if you were to hold that bond till it matures. <\/p>\n\n\n\n<\/figure>\n\n\n\n\u2022 Coupon:<\/h3>\n\n\n\n
When you buy bonds, the company makes interest payouts till the bond matures. This interest that the company gives is called the coupon. <\/p>\n\n\n\n
\u2022 Value: <\/h3>\n\n\n\n
The value of corporate bonds increases when interest rates dip and vice-versa. The longer the time to maturity, the greater the volatility in price. <\/p>\n\n\n\n
\u2022 Credit ratings:<\/h3>\n\n\n\n
The credit-worthiness of bonds matters a great deal while buying them. The ratings help investors assess the corporation or company\u2019s ability to repay debt. Ratings also help investors assess the credibility of the company that has issued the bond. These ratings are issued by agencies like CRISIL, CARE or ICRA. <\/p>\n\n\n\n
\u2022 Research:<\/h3>\n\n\n\n
Although credit agencies issue ratings, it is important to do your research on the companies that are offering bonds when you plan to buy corporate bonds per se rather than via mutual funds or exchange-traded funds that are corporate-bond oriented. Make sure you don\u2019t buy a corporate bond that may be at risk of a default. <\/p>\n\n\n\n
Types of corporate bonds<\/strong><\/h2>\n\n\n\n\u2022 Convertible bonds:<\/h3>\n\n\n\n
If you invest in convertible bonds, you get security alongside interest payments. These bonds could also be converted into shares of the company.<\/p>\n\n\n\n
\u2022 Zero coupon bonds:<\/h3>\n\n\n\n
Investing in this kind of bonds means there is no coupon payment but such bonds offer a high discount rate trade. <\/p>\n\n\n\n
\u2022 Strip bonds:<\/h3>\n\n\n\n
This is a type of bond wherein the interest and principal components are stripped and sold separately. Once the bond matures, the investor who has invested in the principal receives the amount equal to the face value of the bond while the investor who has bought coupons receives the coupon payment. <\/del><\/p>\n\n\n\n\u2022 Junk bonds:<\/h3>\n\n\n\n
These bonds come with high interest rates but also a greater risk. They are typically not rated high. <\/p>\n\n\n\n
Additional Read:<\/strong> Which Investment Option Is Best\nFor The Risk Averse Investor?<\/a><\/p>\n\n\n\nConclusion<\/strong><\/h2>\n\n\n\nBuying\ncorporate bonds comes with its own advantages. Bonds offer a steady income\nsource and offer diversification to your investment portfolio. They also offer\ngood yields at low risk and are flexible. You could pick corporate bonds on the\nbasis of your investment horizon, goals and risk profile. Look up Tata\nCapital\u2019s Wealth Management Solutions<\/a> for protecting and growing\nyour wealth with opportunities to invest in primary or secondary bonds. <\/p>\n","protected":false},"excerpt":{"rendered":"If you have just begun your investment journey, you may have heard of asset allocation and diversification of portfolios. <\/p>\n
<\/figure>\n\n\n\n\u2022 Coupon:<\/h3>\n\n\n\n
When you buy bonds, the company makes interest payouts till the bond matures. This interest that the company gives is called the coupon. <\/p>\n\n\n\n
\u2022 Value: <\/h3>\n\n\n\n
The value of corporate bonds increases when interest rates dip and vice-versa. The longer the time to maturity, the greater the volatility in price. <\/p>\n\n\n\n
\u2022 Credit ratings:<\/h3>\n\n\n\n
The credit-worthiness of bonds matters a great deal while buying them. The ratings help investors assess the corporation or company\u2019s ability to repay debt. Ratings also help investors assess the credibility of the company that has issued the bond. These ratings are issued by agencies like CRISIL, CARE or ICRA. <\/p>\n\n\n\n
\u2022 Research:<\/h3>\n\n\n\n
Although credit agencies issue ratings, it is important to do your research on the companies that are offering bonds when you plan to buy corporate bonds per se rather than via mutual funds or exchange-traded funds that are corporate-bond oriented. Make sure you don\u2019t buy a corporate bond that may be at risk of a default. <\/p>\n\n\n\n
Types of corporate bonds<\/strong><\/h2>\n\n\n\n\u2022 Convertible bonds:<\/h3>\n\n\n\n
If you invest in convertible bonds, you get security alongside interest payments. These bonds could also be converted into shares of the company.<\/p>\n\n\n\n
\u2022 Zero coupon bonds:<\/h3>\n\n\n\n
Investing in this kind of bonds means there is no coupon payment but such bonds offer a high discount rate trade. <\/p>\n\n\n\n
\u2022 Strip bonds:<\/h3>\n\n\n\n
This is a type of bond wherein the interest and principal components are stripped and sold separately. Once the bond matures, the investor who has invested in the principal receives the amount equal to the face value of the bond while the investor who has bought coupons receives the coupon payment. <\/del><\/p>\n\n\n\n\u2022 Junk bonds:<\/h3>\n\n\n\n
These bonds come with high interest rates but also a greater risk. They are typically not rated high. <\/p>\n\n\n\n
Additional Read:<\/strong> Which Investment Option Is Best\nFor The Risk Averse Investor?<\/a><\/p>\n\n\n\nConclusion<\/strong><\/h2>\n\n\n\nBuying\ncorporate bonds comes with its own advantages. Bonds offer a steady income\nsource and offer diversification to your investment portfolio. They also offer\ngood yields at low risk and are flexible. You could pick corporate bonds on the\nbasis of your investment horizon, goals and risk profile. Look up Tata\nCapital\u2019s Wealth Management Solutions<\/a> for protecting and growing\nyour wealth with opportunities to invest in primary or secondary bonds. <\/p>\n","protected":false},"excerpt":{"rendered":"If you have just begun your investment journey, you may have heard of asset allocation and diversification of portfolios. <\/p>\n
\u2022 Junk bonds:<\/h3>\n\n\n\n
These bonds come with high interest rates but also a greater risk. They are typically not rated high. <\/p>\n\n\n\n
Additional Read:<\/strong> Which Investment Option Is Best\nFor The Risk Averse Investor?<\/a><\/p>\n\n\n\n Buying\ncorporate bonds comes with its own advantages. Bonds offer a steady income\nsource and offer diversification to your investment portfolio. They also offer\ngood yields at low risk and are flexible. You could pick corporate bonds on the\nbasis of your investment horizon, goals and risk profile. Look up Tata\nCapital\u2019s Wealth Management Solutions<\/a> for protecting and growing\nyour wealth with opportunities to invest in primary or secondary bonds. <\/p>\n","protected":false},"excerpt":{"rendered":" If you have just begun your investment journey, you may have heard of asset allocation and diversification of portfolios. <\/p>\nConclusion<\/strong><\/h2>\n\n\n\n