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Bonds are debt instruments wherein an investor buys a bond from the state or a company and holds it until the bond matures. When that time comes, the bond's issuer will pay the bond's interest in full. Investors in India can choose from a variety of bonds, including those that are exclusively sold privately and a tax-savings bond that relieves the investor of a tax burden. You should have a mixed investment portfolio to boost your finances.
The bonds are usually locked in for 5-10 years. The maturity duration of the bonds is often referred to as the lock-in period. The bonds are also termed as Non-Convertible Debentures, or NCDs for short, because they are essentially debentures issued by the corporation that cannot be changed into shares, thus the phrase "non-convertible."
Investors can choose from a variety of bonds, such as Public Sector Undertaking bonds, Corporate Bonds, Emerging Market Bonds, and Tax-Savings bonds.
Type of Bonds in India
For centuries, Indians were already dealing in gold, and it has shown to be a sound investment. Here are some of the best reasons to invest in gold:
1) Public Sector Undertaking Bond
A Public Sector Undertaking Bond is a feasible option if you're searching for a medium- to long-term investment in the Indian bond market. Although PSUs are issued and supported by the Indian government, they are frequently sold privately. To put it another way, the Indian government targets private investors and provides them with fixed-rate bonds. In this circumstance, an investment banker normally merely acts as a middleman.
Also Read about - What is Investment?
2) Corporate Bond
These are much more classic bond securities that are issued by private Indian firms for terms of up to 15 years. A corporate bond, rather than the government bonds stated earlier, can be purchased by anybody. However, there is a greater chance of default. It can be influenced by the company issuing the bond, market conditions, the firm's industry, and its financial grade. However, the risk is compensated by a significant amount of money.
3) Financial Institution Bond
Bonds issued by banks and other financial institutions in India are a popular tangible asset that accounts for the majority of the country's bond market. The reasons are straightforward. Financial institutions and banks issue bonds that are well controlled and have high bond ratings. The far more significant stakeholders in this group are big investors.
4) Emerging Market Bond
Emerging markets bonds, granted by the Government of India, are sold overseas as strong currency to provide funds for third-world nations' industrial prosperity. These bonds are distinguished by the fact that they are typically issued in US dollars or Euros, making them more appealing to investors in those nations.
The rate of interest on such EM bonds is also appealing since, while it is high, it is often repaid by the issuer. The danger arises from the fact that individuals with similar credit ratings, such as India, have lower credit ratings, and the performance of the bonds is linked to the state's financial progress.
5) Tax Saving Bond
The Indian government used to offer special bonds that allowed citizens to be exempt from taxation in part or whole. Regrettably, these bonds were no longer available for purchase in early 2018.
6) Municipal And Local Authority Bonds
Local or municipal authorities can raise finance through bonds to fund projects like public waterworks, construction, etc. Credit rating agencies rate these bonds, and it is advisable to refer to the records before investing.
Government bonds have a premium rank when it comes to financial stability and guaranteed yields. Because G-Secs are a type of legal declaration of the government's debt obligation, they imply the issuing governmental body's commitment to repay according to the terms set forth. Inflation-Indexed Bond balances are modified to account for rising average prices. Aside from that, inflation is factored into the principal amount invested in Capital Indexed Bonds. These give investors an advantage because they are less likely to be financially harmed. After all, participating in such funds increases the real worth of the monies invested. According to RBI regulations, interest profits on Government Bonds are meant to be released to debt holders every six months. It enables investors to earn a consistent income by investing their unused funds.
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It's also a good long-term investment alternative for companies that haven't invested in stock market tools before. This security feature is suitable for risk-averse investors who desire superior investment security without the uncertainty associated with market-linked products. The Indian government has taken initiatives to guarantee that G-Securs gain acceptance and appeal among retail investors while also streamlining the subscription process.
Canara HSBC Oriental Commerce Bank even offers a Unit Linked Insurance Plan (ULIP), where you can have the benefit of both investment and insurance. These ULIPs are centred on many funds like equity, debt, liquid funds, etc. You can buy the best ULIP to stay on track of your financial goals along with protecting your life goals with a life cover.
Financial Planning - Top Selling Plans
We bring you a collection of popular Canara HSBC life insurance plans. Forget the dusty brochures and endless offline visits! Dive into the features of our top-selling online insurance plans and buy the one that meets your goals and requirements. You and your wallet will be thankful in the future as we brighten up your financial future with these plans.
Fixed Returns, Zero Risks & Worries
iSelect Guaranteed Future Plus
- 4 Plan options
- Life cover + Guaranteed benefits
- Accidental death benefit
- Premium protection cover
Save, Dream, Plan. Live Peacefully
iSelect Guaranteed Future
- 5 Plan options
- Option to choose PPT
- Get Tax benefits
- Premium protection cover
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The premium is one of the most important factors to consider before buying a life insurance policy. Many people buy a life insurance policy with a high sum assured but are unable to process the premiums for the entire premium payment tenure. You can get a better idea of the premium outgo with the premium calculator available in the 'Tools and Calculator' section of www.canarahsbclife.com.
Frequently Asked Questions (FAQs) Related to Life Insurance Policies
Buying a life insurance plan with adequate coverage can be a financial cushion for your family. It ensures that the family's lifestyle and goals are not compromised due to unfortunate events such as death or disability.
Some life insurance plans, like Unit Linked Insurance Plans (ULIPs), offer wealth creation opportunities to policyholders, along with life coverage. These plans let you invest your premiums in different securities, like equity, debt, and more, to enjoy the benefits of inflation-beating returns.
Life insurance policies offer valuable tax benefits, enabling you to enhance your returns and accumulate savings. The premiums paid for the policy qualify for deduction under Section 80C of the Income Tax Act, 1961, up to ₹ 1.5 lakhs annually, subject to certain conditions. Furthermore, the funds withdrawn from the policy after the lock-in period and the maturity value received from life insurance plans are also tax-free.
Your source of income will no longer exist with you after retirement. It is crucial to have enough money saved up so that, when you retire, you won't need to worry about anything. Together with a steady income stream, retirement plans offer life insurance.
Rider benefits add extra coverage and more protection against risks. Insurance riders are affordable, beneficial add-ons you can select to add to your policy. They strengthen the insurance policy by extending beyond the base policy. Some of the common riders are critical illness riders, accidental death riders, disability riders, and more.
Investment-linked life insurance plans such as endowment, money-back, and whole-life plans accumulate cash value over time. While these plans typically span a longer term, you can obtain a loan against the cash value they accrue. This feature enables you to access a portion of the funds within the plan while maintaining the investment toward the intended goals.
Life insurance plans are a practical means to realise your child's aspirations. These policies offer either a lump sum payment or regular income to support your child's education and empower them to pursue their ambitions unhindered.