Most Bonds offer lower yet reliable returns. However, some Bonds carry a greater coupon rate. These are Corporate Bonds. They provide multiple benefits to bondholders and are also called Company Bonds. Let us learn about these Bonds and understand who should invest in them. Here are a few questions you should ask before investing in these Bonds.

What are Corporate Bonds?

Corporate Bonds are offered by corporate entities. Companies issue them to raise capital for financing their various projects. People who opt for these Bonds lend funds to the company by buying them. After the Bond matures, the company should repay the principal sum to the bondholder who invested in it. The company also legally commits to offering regular payments on the principal depending on the rates of the Corporate Bonds.

These Bonds let you diversify your investment. They are also highly liquid. Besides, they may also offer higher returns than Savings Accounts. A few other features and benefits of Corporate Bonds include:

• They offer regular cash payments. This provides a high certainty of income.
• Bonds are generally less volatile than stocks.
• Once the Corporate Bond matures, you get the principal amount you invested. This reduces the risk of fund loss.

Who should buy Corporate Bonds?

You can consider Corporate Bonds in India in the following cases:

• You are considering fixed regular interest earning.
• If you want low volatility in your investment portfolio.
• If you are an investor looking for a medium- to long-term investment option.
• If you want to diversify your portfolio.

Questions to ask when investing in Corporate Bonds

Before investing in these Bond, ask the following questions:

What is the credit rating of the Bond?

If you want to invest in Bonds and are considering Corporate Bonds, check your Bond’s credit rating. Agencies like ICRA and CRISIL provide this rating. A higher rating, such as AAA, tells you that the Bond is less risky.

What is the maturity date of the Bond?

Corporate Bonds usually have a maturity date. Select a maturity that matches your investment horizon when buying such a Bond.

What are the features of the Bond?

Before you invest, understand if the Bond has any special features.

What is the financial health of the company?

Review the financial health of the company issuing the Corporate Bonds.

What are the tax implications of the Bond?

Assess how the interest from the Bonds would be taxed.

How frequently will the interest be paid?

Corporate Bonds may pay bondholders interest at intervals, such as quarterly, monthly, annually, or semi-annually. Choose the frequency that matches your needs.

Conclusion

As evident, Corporate Bonds are usually recommended for various investors. However, while they can offer greater yields than conventional fixed-income investments, they are also riskier. Hence, ensure you make an informed choice.