Algates Financial Private Limited

Bonds

Get Yourself a Regular Fixed Income

What are Bonds?

Bonds are fixed income financial instruments. They are offered to public by governments or corporations to raise capital. 

When you buy a bond from a company, you give your money to the company as loan for a fixed tenure. The company in return makes a series of fixed payments to you at regular intervals. These are called coupons. At the end of the tenure, the company returns the initial capital which you invested in the company back to you.

This works for bonds issued by governments too. Government bonds are much safer as the payments are guaranteed.

How do bonds work?

Bonds are vehicles through which governments or companies raise capital. Unlike equity, bonds come with a fixed tenure. Bonds also carry a specified coupon rate at which regular payments are to be made to the bond holders by the company.

To the bondholder, bonds give regular fixed income in the form of coupon. Rate of coupon and frequency of payment are pre-specified. At the end of the tenure, bondholder gets the nominal value of the bond back. 

After the initial offer to the public, bonds are also traded in the secondary market just like equity. This provides liquidity to you as a bondholder. You can sell your bond holdings at an agreed price with another buyer. Just like equity, the price of a bond in the secondary market is decided by the market forces and buyers and sellers participating in the trade.  

Bonds may be traded at a premium or at a discount in the secondary market depending of the rating of the bond and financial condition of the issuer. Your yield to maturity on any bond will depend on the coupon on the bond, price at which you bought it and time to maturity.

why should you invest in Bonds?

Bonds are fixed income securities. They provide a series of fixed income which is desired by some investors. Hence, bonds form an important component of a well diversified portfolio. Other features include:

Low Market Risk: Unlike equity, bond payments are fixed in nature and hence carry very low market risk.

Less Volatility:  Bond prices in secondary market carry little volatility. This gives some piece of mind to you as an investor when your equity portfolio is beaten down.

Better than Bank: Bonds offer higher coupon rates than what is offered in simple bank deposits. This makes bonds more lucrative investment option for you in fixed income investment avenues.

Credit Risk: Bonds carry a very high credit risk from the issuer of the bond. Payments can be delayed or even cancelled if financial position of the issuer deteriorates to a point where it is unable to meet all its financial obligations.

However, government bonds do not carry this risk.

What do we offer?

Algates Financial as an Authorised Person of Cholamandalam Securities Limited brings to you a platform to buy and sell bonds in the secondary market. 

All you need to do is open a demat and trading account with us to start investing in bonds. 

Prices of all the available bonds are quoted on a daily basis. Once you buy a bond, it is stored in your demat account in electronic format. You can sell any bond which you are holding at any time before maturity if you find a suitable buyer in the market.