How to Invest in Bonds & Debentures? - Hindi - YouTube

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Namaskar, my name is Mukul, and Welcome to Asset Yogi.

Friends this video is a part of a series in which we are discussing debentures and bonds.

I have already made 3 videos on this.

In the first videos, we understood the difference between bonds and debentures.

In the second video, we clarified what is the difference between share vs bond investment.

And we also inferred what kind of risks and returns this have

And in the third video, we covered types of Bonds and Debentures

If you haven't watched those videos.

So I would suggest you should watch those videos before watching this video.

You will find the links in the description below.

In this video, we will understand how you can invest in bonds and debentures.

Which avenues are available for you to invest in?

What kind of returns can be expected from different types of Bonds

So if you want to earn fixed income by investing money

so keep watching this video

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What is meant by fixed-income security

Bonds and debentures are fixed security income.

In this, you are lending money to a company.

that acts as a loan

And in return, the company promises you the fixed interest.

Let's say if a company says we offer you 9% interest Per annum

For the money, you invest with us.

So whatever will be your maturity period

Let's say the period of 5 to 20 year

You will get the principal amount after that maturity period

Furthermore, if you opted for cumulative interest.

Likewise, you will get all the accumulated interest.

Otherwise, you have another option

That you can take your interest every year.

So what options do we have in India?

In India either you can invest in corporate bonds.

In the corporate bonds and debentures.

The second option is you can also invest in Government Bonds.

Government Bonds can be of Central Government or State Government.

And the third is tax saving funds.

Like, National Highways Authority of India

And Rural electrification corporation

Power finance corporation

They commence their bonds

So you get relief from Capital Gains Tax.

If you have sold a property, and if you invest this amount in their fund

So you do not have to pay long-term capital gains tax.

So I will broadly talk over these three ways in this video

Firstly let's talk about, What are the ways we have to invest?

First is an indirect way, indirect means you can invest in mutual funds

There are several mutual funds. You must have heard that there are debt mutual funds too.

So if you invest in debt mutual funds, the mutual fund takes money from you.

And Invest in different types of funds.

It can be government Funds or cooperative bonds

So what are the benefits and drawbacks in an indirect way?

Its biggest benefit is convenience. You don't have to physically go anywhere.

You do not even require to do research, you can invest in a debt fund directly.

but what is its drawback

The drawback is its fee.

Any mutual fund charges you 1% to 2% every year

If you want to save that fee then you can invest directly.

What are the options we have for direct investing

If you want to invest in corporate bonds and debentures

So what kind of interest are promised?

The interest of any company directly depends on its rating

It depends on its credit rating if the balance sheet of a company is extremely strong

So it means, that company is giving very low risk

Your risk is very low, So the company will also promise a low-interest rate.

If the company is a high risk, its credit rating is low

So the company have to promise you a high-interest rate

The second thing on which year interest rate depends

That bond or debenture is secured or not

What is meant by secured bonds and debentures

That bond or debenture is supported by the assets of that company

If the company is declared insolvent So by auctioning the company's assets

Bond-holders can be paid. If the debenture is unsecured

That means it does not have assets after it

If the company goes bankrupt

so you can forfeit your money. so this is your risk and you should know it.

And if you invest in unsecured debentures

So the major incentive for you is that there you are promised more interest rate

So the corporate bonds and debentures are also traded in stock markets

If you want to invest in it, so by your trading or Demat account

You also get this option in your brokerage account

There are several listed bonds you can directly invest in it

The second option you have

There are multiple popular commercial banks like SBI,

ICICI, HDFC.

You can also invest through these banks.

the third option is you can invest through their websites or

by visiting any of their branches which they advertising

you can also invest by visiting there physically.

And in what form will you get it?

If you go physically then you can also get it in the form of a physical certificate

And if you have a Demat account

At today's date, it is mandatory to have a Demat account.

If you get it in the form of Demat, it will directly start reflecting in your Demat account.

So we have discussed corporate bonds, now let's talk about Government Bonds

How you can purchase Government Bonds directly

Either you can invest in mutual funds directly, If you want to purchase directly

Then you cannot purchase directly from your trading or Demat account

Because brokers are not registered with the RBI.

To purchase government bonds, either a financial institution can purchase them

or commercial banks can purchase Government bonds

Or primary dealers can purchase,

As Retail investors, you cannot buy Government Bonds directly.

If you want to invest in Government Bonds,

So you can invest through any popular commercial bank.

Like SBI, ICICI, Axis

HDFC, etc

What kind of returns you can expect in Government Bonds

If we talk about today's date, then you receive returns of 7% to 8%.

You receive around 7% returns if you invest for short terms,

I.e. for 5 to 10 years

And if you also invest for 20 to 30 years. So you get returns of around 8%.

So if you want to invest in Government Bonds you can visit any commercial bank

The second thing you should know is that you cannot buy Government Bonds online

You have to physically visit a branch of a commercial bank

And you have to execute the application process then only you can invest

But it is mandatory to have a Demat account so the bond certificate that you will receive

You can get that form in physical form or in Demat form. But you should have a Demat account.

And another notable and significant aspect related to government born

that government bonds are not traded in stock market

Only after the maturity period, you will get your money back.

So government bonds are slightly illiquid assets. So you should also pay attention to it.

So now we also discussed Government Bonds.

Now let's talk about tax-saving funds. Organizations like :

National Highway Authority of India, Rural electrification corporation

And power finance corporations provide these funds

If you want to invest in them, so you have to physically visit the financial institutions

and banks that are registered with them

You have to physically visit there

Then only you can invest in them

Remember one thing, you receive a low-interest rate in it

Here you will receive an interest rate of 5% - 5.5% only.

Why interest rate is low,

Because here you are saving your capital gains tax. So it becomes very significant because

Long Term Capital Gains Tax is around 20%. So if you divide it over the period

So your overall interest rate will be 9% to 10%,

So broadly these are the three types of bonds

Cooperative bonds, Government Bonds, and tax saving bonds

We have discussed all three and how you can invest in them.

Either you can invest indirectly through mutual funds.

Or you can invest directly, depending on what avenues you have

Now quickly I will show you how a bond certificate looks like

And the terms and conditions about which you should be careful about

I purchased bonds from L&T infrastructure finance company in 2012.

In the financial year 2011 - 12

in the tax saving, you get the Rebate from infrastructure bonds extra investment.

I have purchased ₹10000 bonds of L&T

Let's have a look at what information details we have here

Firstly, these are secured bonds,

These bonds are not unsecured.

These are not irredeemable,

They are redeemable which means they have a fixed maturity date

And these are non-convertible debentures, that this cannot be converted into equity shares

What are the other important details

Here two interest options are available, one is annual and the second Is communicative

Either you can take your interest every year, or you will get your cumulative interest payment

along with principal at the end of maturity

What is the face value

The value of 1 bond is 10000 rupees in both cases,

Buyback facility is provided in both, Buyback facility means these are callable

as I said these are bonds

When can this be callable?

The company can buy back them after 5 years

Or the company can buy back them after 7 years

After five years of buyback

If you have chosen Annual Interest Payment.

Then you will get the money at face value,

And if you have selected cumulative you will get ₹1,538 per bond after 5 years

After 7 years here you will receive ₹1,000,

But here you will get 1828 rupees.

See in this case your interest payment is being made every year

Accordingly here is the maturity period is mentioned

What is the total maturity period

The maturity period is of 10 years

Here the maturity amount is mentioned of Rs 2367

But in this case, you have been given only Rs.1000

Because here you are getting interest payment every year.

So you just have to keep these few things in mind.

What terms of the condition have been written to you in the Bond Certificate

and what are you buying.