Why invest in corporate bonds?
Corporate bonds offer a compelling investment avenue for those seeking higher returns, portfolio diversification, and potential tax benefits. By lending to companies through bonds, investors can earn predictable income while managing risk based on the issuer's creditworthiness.
Key benefits of investing in corporate bonds
- Higher yields: Compared to government bonds or fixed deposits, corporate bonds generally offer better interest rates to compensate for the credit risk involved.
- Diversification: Adding corporate bonds to your portfolio reduces dependency on equities and helps balance risk, especially during market volatility.
- Tax efficiency: Certain corporate bonds, such as tax-free bonds issued by Public Sector Undertakings (PSUs), offer tax-exempt interest income—ideal for investors in higher tax brackets.
These bonds suit both conservative and growth-oriented investors depending on the bond’s rating, maturity, and structure.
What if?
| Scenario | Explanation |
|---|
| You're looking for steady income | Corporate bonds pay regular interest, offering cash flow certainty. |
| You're in a high tax bracket | Tax-free PSU bonds can help you reduce tax liability. |
| You're concerned about capital safety | Choose bonds with high credit ratings (e.g., AAA). |
| You want to trade bonds | You can buy/sell corporate bonds on FYERS in the secondary market. |
Before investing, check the bond’s yield, credit rating, maturity, and issuer details. These factors influence both return and risk.
Last updated: 11 Jun 2025
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