New Delhi. Do you know about an investment option in which your money will be safer than FD and there will be more profit if interest rates go down? Talking about security, the Indian government guarantees 100 percent investment in government bonds, but in case of bank FD the maximum guarantee is up to Rs 5 lakh. But if you do not know about government bonds then you are not alone. In 2015, a survey conducted by market regulator Sebi revealed that 99 per cent of the population knew about FD but less than 7 per cent knew about government bonds.
Why invest more in FD
Here the question arises that if there is no risk then why do most people invest in FDs instead of government bonds. One reason for this is that banks take cash, but you cannot buy government bonds in cash. But it is true that here your money is more secure and the returns are also good. If you intend to invest in these bonds, then tell us that there are three ways to invest in bonds.
How to invest in government bonds
– There are three ways to buy government bonds. The easiest route is that of mutual funds classified as gilts, money market funds and low-duration funds.
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– The second way is to buy directly from the stock exchanges or participate directly on the NSE bond auction platform available to retail investors
– The last and probably least used option is to buy through a broker. The mutual fund route is generally considered the best.
Tension free investment option
The biggest feature of government bond mutual funds is that you do not need to analyze it on the basis of credit rating as there is no risk of default by the Government of India. That is, it is a tension free investment option. But it is not that you cannot be harmed here. You may incur losses in case of interest. But there is no loss that will reduce your capital. These losses will come in the form of reduced profits.
interest rate risk
The interest rate risk is that if the government is prepared to pay more interest than the interest rate it is currently offering, then you will suffer a loss. To put it simply, if the government is ready to pay more interest on the new bonds, then the first bonds it has issued, you will have less interest on those you have. This will reduce the price of the bond you have.
How much to invest in government bonds
Experts recommend that you keep an investment of Rs 2-5 lakh in emergency FD so that you can withdraw immediately if needed. You can invest the rest of the FD money in government bond mutual funds. They are also taxed. By the way, government bonds are considered better for those investors whose income is high.
