Everything that comes out of the government office is valued more. Any job or investment opportunity tries to provide an interesting opportunity to get a competitive paycheck. The story goes that whenever someone needed a companion, the first prerequisite was to mark the “Government Work” on the list, as it ensured many things. Most importantly, job security and vacations. No matter what he did in the office, the approval tag was enough to gain respect between people and relatives. Anything else looked bad.
Compared to the private sector, competition and labor pressure within government jobs are lower than private companies. Sure we’ve heard stories of someone going to work and coming home every day without complaining. Leave work stress on the office table every day and cover the same date and take home all the festivals. Soon, people working in government jobs have a home of their own, with four-wheel drive, and are already planning a vacation. All this plus the gratuity and the pension after retirement.
Private companies run out of money. They may not have anything to offer after a while, which leads to reductions, but government work will ensure that you are in good hands and will ensure that they provide you with the day you enter. You have a roof over the government quarters and first priority during health emergencies. The cost is subsidized. Save more. You can spend more time with your family. Not only that, but you can take risks and invest in different places.
Government bonds are an excellent candidate for investment because the government issues them to meet various development needs. They have assured returns and benefits that we will learn in this blog.
What are good RBI?
The Reserve Bank of India issues RBI bonds at the request of the government. These types of bonds are also known as GOI tax savings bonds. These are, among other securities, issued by the GOI to investors of variable size, such as commercial banks and companies or individuals. In recent years, the Government has opened its doors for investors and individual companies to invest.
The government issues bonds to meet its development needs related to infrastructure, operations or to finance its new project.
Bonds are debt instruments for which an investor obtains fixed interest, while preserving his capital until maturity. Interest and tenure are predetermined. The probabilities of default on interest payments are almost nil because the bonds are guaranteed by the government.
Government bonds are also known as G-Secs and offer an investment period ranging from one year to forty years. There are different types of government bonds that benefit investors and their variable needs.
Read on too Why should you invest in India?
Types of public bonds
1. RBI Bonds / Variable Interest Bonds
RBI floating rate bonds are true to their names. Most RBI bonds are issued at a variable interest rate. It is a great source of investment for risk-averse investors. It is decided every six months, depending on the market interest rate. However, a fixed return is not possible because the variable rate varies constantly.
Things to remember when investing in good RBI.
- The investor cannot use it as collateral to apply for loans.
- The bond cannot be transferred unless it is transferred to the candidate.
- Some banks offer the purchase of bonds online.
- The interest on RBI bonds is taxable depending on the tax bracket in which the individual is located.
- The nominal value of the bond is ₹ 1,000 (i.e. 1 bond). There is no limit to how much you can invest.
2. Zero coupon vouchers
Zero coupon bonds have no coupons attached. That is, the investor is issued the bond at a discount and the capital is returned to investors at maturity. Investors often invest in these bonds to appreciate capital
3. 7.75% savings vouchers
As its name suggests, this GOI bond offers an interest rate of 7.75 percent. The interest you earn on these bonds is taxable. With a minimum amount of 1.000 1,000, you can invest in 7.75% bonds.
4. Sovereign Gold Bonds (SGB)
GBS are public securities denominated in gold. GBS is a superior alternative to maintaining physical gold. Risks and storage costs are eliminated. RBI has these bonds on behalf of the Government of India. These bonds are issued in the denomination of one gram of gold and multiples of the same with a maximum subscription limit of 4 kg for individuals.
5. Bonds indexed to inflation
Investors who want to protect their investments from rising inflation invest in these bonds. The principal and interest correspond to inflation.
STRIPS stands for Separate Trade of Registered Interest and Principal Securities. The strips are close to the zero coupon values issued by the government. It is a process of separating bonds into their individual components and coupons.
Benefits of government bonds
- 1. Preservation of capital:
- Many investors who cannot risk losing money choose government bonds because they are the safest form of investment. Government bonds are backed by the central government. The money you invest will be returned to you at the end of the term.
- 2. Security:
- The government offers a fixed interest rate to all investors. There is no risk of losing the main. Therefore, investors have a fund security until such time as their money remains invested.
- 3. Diversification:
- Government bonds offer low-risk opportunities. Therefore, create a well-balanced portfolio for investors. Soften the impact of volatile stock market on your other investments.
- 4. Interest rate:
- The G-Secs offer a competitive interest.
Read on too How to make your money work in 2021?
Disadvantages of public bonds
- 1. Connection problem
- The loss of relevance of public bonds over time. In addition to some exceptions, such as the index-linked capital bond and the inflation-indexed bond
- 2. Low yields
- Government bonds earn lower interest rates than corporate bonds. Because they offer stability and a safe investment step, they usually offer low interest rates. Your investment will produce market value, which could be less than the original price of the bond.
Where to Buy RBI Bonds Online
Central or state governments issue public bonds to fund various government projects. There are two places where investors can invest in bonds: – Primary Market and Secondary Market.
RBI bonds can be purchased online or offline through public or private banks. Therefore, the purchase is not possible except in banks or entities authorized by the GOI.
Featured services that offer the purchase of RBI vouchers online.
- ICICI bench
- HDFC bench
- Banc IDBI
- Axis Bank
- SBI Bank
The primary market is where bonds make their first appearance. The issuer issues the bond directly in the primary market. Therefore, the money goes to the issuer. There is no other party involved.
Once the entity issues the bond, it is free to follow its course according to the needs of its investors. They can sell the bonds to interested buyers. The secondary bond market is a market to secure trading. Investors trade bonds with each other. The secondary bond market is made up of brokers, individual investors and platforms that buy and sell bonds.
How to buy RBI bonds?
The graph above shows how the file works G-SECS has acted in the last five years. Government bonds they are best suited for retirees and those who need to save their money for a few years. Currently, people insist on investing in bonds for diversification and liquidity.
The easiest way to buy G-Sec is the NSE GoBid app. The voucher can be purchased on the app or on their website.
Log in to your account and choose the number of securities you want to buy based on your investment goals, and then make the purchase using your preferred payment method. This is bingo!
The minimum investment amount for government bonds is ₹ 10,000. Government bonds are 1 to 40 years old.
That said, BondsIndia is the first blockchain-based investment platform in India for purchase and sale of bonds. Feel free to take a look at the bonus section of the website and buy the ones that suit your investment goals. Bonds always have an advantage when it comes to guaranteed investments. We still don’t deal with G-Secs.
How to apply for RBI bonds in India?
Bonds are high security investment instruments. Making one investment in bonds it is easier than before. Previously, investors had to go through an offline process that would take a good seven days to finally acquire bonds. In addition, small investors often had the last priority due to the presence of large investors.
Things have changed in recent years. Under the non-competitive bidding method, small investors can now participate invest in bonds. Government bonds can be purchased through a simple online process.
You can buy the bond directly from the issuer on their website by uploading your KYC data and making online payments, which is what investors do in the primary market. Most investors also prefer to invest in bonds in the secondary market, where bonds are traded in real time and real-time price discovery comes into play.
How to Sell RBI Bonds in India?
Bond investment they are for those who want to park their funds for a long time to meet the needs they have planned for the future. However, no two investors are alike. Some may need their funds sooner.
You can search for interested buyers through agents or log in directly to the NSE website. The sale of bonds has been made easier for investors since 2018. Sell the bonds the same way you bought them, only this time you will sell them on the secondary market.
Read on too Advantages of the bonds in your portfolio
Wherever you invest, be sure to do a thorough research on the issuer and how you can end up losing money, even if government bonds are said to be the safe and preferred way to preserve capital. There had been cases where the Government had canceled or canceled bonds and the investors ended up losing all their money and most were individual investors, retired professionals who had put in their life savings.