Are you are confused? Are you unable to decide on the best investment option between the two Corporate Bonds and Fixed Deposits? Do not worry. FDs in India are a popular saving instrument and It is facilitated by private, nationalized banks, NBFCS, and other entities. Unlike other investment instruments, FDs have their own limitation.
Bonds on the other side are a good option for people and organizations looking for higher returns in a short period of time but There are many investment instruments in the fixed income securities and bonds is among the most popular instrument. Since investing is a big financial decision and you need to take wise decisions. You can buy corporate bonds online and through other authorized sources in India.
In this context, we will learn about the differences between the two to understand better the best investment option.
Corporate Bonds vs Fixed Deposits
| Particulars | Corporate Bonds | Fixed Deposits |
| Definition | Corporate Bonds are debt security issued by private and public sector companies. | The fixed Deposits option is offered in India by banks and non-bank financial institutions (NBFCs). It comes with a host of benefits for customers falling into different categories. |
| Purpose | Firms issue Corporate Bonds to raise money for varied reasons. The primary purposes include projects, operations, expansions, and growth possibilities. | Fixed Deposits are done to fulfill varied financial goals that include education and marriage of children, buying property and other expenses. |
| Liquidity | Corporate Bonds are preferred for their liquidity feature. It can be sold in the secondary market as and when required. | Investors can get the money back at the end date of maturity and Premature exit attracts charges. |
| Returns | Returns in Corporate Bonds are relatively higher. It is chosen for better coupon rates that range between 7-12% annually. | Returns here are guaranteed. You get a fixed income in the form of interest. or The interest in FDs typically ranges between 3.25 to 5.50% |
| Risks | It is a secured category of the bond. In case of an issue declaring default, you have the right over the collateral assets. | It has capital protection up to 5 lakhs by the insurance company. |
| Flexibility | There is a minimum amount known as face value to start with and you can invest an amount based on your personal capacity. The maturity is fixed by the bond issuer. | Investors are allowed the flexibility to choose tenure and the amount to be invested. |
The statement says the higher the risk, the higher the return. Lower the risk, less is the return. If you can take risks, investments in corporate bonds are a good option as you can earn good returns on your investment with the liquidity features. For investors who are risk-averse and prefer stable income irrespective of market conditions and investment in FDs is a good choice. The capital with the accumulated interest is paid back at the time of maturity.
Why not buy online corporate bonds with higher credit ratings and minimize the risks of default? Investing in bonds with AAA ratings is a better option, safer than bonds with a lower rating.
