What are NCDs and Bonds? NCDs and Bonds are types of debt instruments issued by companies or governments to raise funds. They essentially represent a loan from investors to the issuer.
NCDs (Non-Convertible Debentures)
Debt instruments issued by companies.
Cannot be converted into equity shares.
Offer a fixed rate of interest.
Can be secured (backed by assets) or unsecured.
Typically have a fixed maturity period.
Listed on stock exchanges, providing liquidity.
Bonds
Debt instruments issued by governments, corporations, or other entities.
Can be convertible into equity shares (convertible bonds) or non-convertible (similar to NCDs).
Offer a fixed or floating interest rate.
Can be secured or unsecured.
Vary in maturity periods.
Can be traded on the secondary market.
Why Invest in NCDs and Bonds?
Regular Income: They provide a steady income stream through interest payments.
Lower Risk: Compared to equity investments, NCDs and bonds are generally considered less risky.
Diversification: They can help diversify your investment portfolio.
Capital Appreciation: In some cases, bond prices can increase, leading to captial gains.
Important Considerations
Credit Rating: The credit rating of the issuer reflects its ability to repay the debt. Higher ratings indicate lower risk.
Interest Rate Risk: If interest rates rise, the value of existing bonds may decline.
Liquidity: While NCDs are generally liquid, some bonds may have limited liquidity.
Tax Implications: Interest income from NCDs and bonds is generally taxable.
Disclaimer
All investment in NCDs and Bonds carry liquidity, reinvestment and interest rate risk. Please read offer documents carefully before investing.