FINVASIA issue bonds to provide the flexibility to invest. It is an open-ended income fund developed to manage a portfolio of good quality debt as well as Money Market Instruments so as to provide reasonable returns and liquidity to the Unit holders .It is a regular income for short-run.
Bonds are an instrument on which issuer promise to pay specific amount of money “principal amount” on the maturity date, until that date company keeps on paying stated rate of interest . Bond market in India has been diversified to a large extent and is a huge contributor to the growth of the economy in recent times.
1. Bonds has a specific maturity date which can range from 20 to 30 yrs, based on range they are referred to as long term and short term bonds.
2. Interest on bonds can be received annually or semi-annually which is calculated as certain percentage of face value and is known as “coupon payment”.
3. Bonds can be issued at par which means price at which one unit of bond is being sold is same as face value.
4. Problem of interest rate risk is being faced by binds which means when price is high, yield is low and vice-versa.
1. Volatility of bonds is lower than that of equities, thus they are viewed as safer investments than stocks.
2. Bonds are often liquid as it is usually possible for an institution to sell a large number of bonds without affecting price much.
3. Bondholders enjoy a legal protection i.e. if the company got bankrupt then they will receive some money back.
4. There are variety of bonds to fit needs of different investors such as zero coupon bonds, inflation linked bonds, convertible bonds.