What is a bond? What are the benefits of investing in debt securities?

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Debentures are units that are divided so that the total debt capital can be purchased by the general public. An official letter prepared by a company to invest in a loan, which includes the loan amount, interest rate and payment process, and the conditions of the collateral. In this, the investor gets the specified interest at the specified time.

If the company fails to receive interest and principal at the rate and time specified in the issuance of the bond, the company may even take action to send it for liquidation. Therefore, bonds can be considered as the best option for investors who do not want to take risks.

Lately, the issuance of bonds by commercial banks in Nepal has increased. Banks in Nepal have sold bonds for a period of up to 10 years. Bonds are issued to pay interest half-yearly and annually. It is guaranteed to pay the interest on the loan, whether you invest it or not. That’s why some investors buy bonds for secured investments.

Investors are freed from the risk of interest rate changes on bank deposits as they receive timely interest payments when investing in bonds. That is why investors seem to have invested in bonds.

Banks seem to want to invest by raising money through bonds when they are facing the problem of lack of investable funds. Recently, some banks have issued bonds at 10 percent interest rate. Bonds can be taken as a good tool for investors to invest safely after getting good interest.

Benefits of investing in bonds

Interest should be paid on the debentures issued by the bank before the dividend is distributed to the shareholders. Mandatory interest must be paid to the debtor even in case of loss.

Bonds can be easily bought and sold as they are also listed in the stock market. Investors can reap long-term benefits as loans can be taken even with collateral.

Some bonds are of the nature of repayment of principal and interest after maturity, while others are of the nature of conversion into shares. So investors can invest by looking at the nature of the bond for long-term benefits.

Bonds are the best investment option for investors who want a lucrative annual income.

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