"An investment in knowledge pays the best interest." — Benjamin Franklin

The following quote is worth remembering, especially when considering investing your hard earned money to generate a profit.

Investing your savings alone does not guarantee you benefits. One needs to carefully understand the dynamics of the present market situation before investing in a certain investment vehicle.

Besides having sufficient knowledge, an investor should also know his limitations, which refers to his ability or rather limitation to take risks. More commonly known in the financial world as risk appetite.

Among the varied investment options available for investors, bonds are considered to be one of the most safe investments. So, if you are someone who wants to have diversified portfolio, adding bonds as a part of your investment strategy can generate great benefits.

This article discusses some of India's best bonds, which can generate stellar returns on your investment.

There are different types of bonds available for investors in the market, to get a deeper understanding refer the article- types of bonds in India and how to invest In them.

The below 4 bonds are the best kind of bonds available for Investors in India

a) Government Bonds

The central or state government of India issues debt instruments called Government securities bonds. In India, Government bonds are considered Government securities (G-Sec), which are mostly long-term investments with terms between 5 and 40 years.

In addition to state development loans, the state government also issues bonds. Government securities were created by the Indian government so that small investors could invest small amounts and earn interest. These bonds pay interest every six months and can be fixed or variable. The interest rate on most government bonds is fixed.

Government Bonds are considered one of the safest instruments because of the backing by the government.

In an auction process, the Reserve Bank of India (RBI) issues the dated securities on behalf of the Government. Semi-annually, the RBI announces the quantum to be borrowed, the auction dates, and the terms of the securities to be issued. The Public Debt Office (PDO) of the RBI manages this auction and also facilitates servicing of the debt i.e. payment of periodic interest and repayment at maturity.

b) Corporate Bonds

These bonds are issued by companies as a means of raising capital. An investor who buys a corporate bond is essentially lending money to the company in return for interest payments, although they may also be actively traded.

Corporate Bonds have different maturities and can range from 1 year to 20 years. These bonds have a different maturity profile range from 1 year to 20 years, and are generally medium to long term debt instruments. 

India has a lot of issuances of Corporate Bonds as corporate bond issues help companies raise money without having to dilute their share holding

But these bonds have a higher chance of default, and therefore have higher risk than government bonds. Due to its nature of high default risk, corporate bonds provide high return.

It is important to anlayse the rating of the bond of a particular company before investing. At BondsKart, we only offer premium grade AA to AAA rated bonds so that your investments are better protected.

c) Tax-Free Bonds

As the name suggests, returns earned on these bonds enjoy tax exemption as per the Income Tax Act. These bonds are considered very safe and has a maturity range of 10-20 years.

If you are looking to invest in Tax-Free Bonds, then you can check here

d) Zero-Coupon Bonds

A zero-coupon bond is a discounted investment that helps to serve futuristic goals. A zero-coupon bond is a type of bond which has no interest to be paid to the bondholders and it trades at a discount to the face value of the bond.

A zero-coupon bond does not pay periodic coupon payments and trades the bond at a deep discount. Time value of money plays an important role. Time value of money represents that money is worth more now than the same amount is in the future.

For example, an investor would prefer to receive Rs. 100 today than in the future. By receiving Rs. 100 today an investor would invest that elsewhere and earn higher interest thereby earning more than Rs. 100 in a year's time.

Using a zero-coupon bond in the above example an investor who purchases a bond that does not have periodic coupon payments expects to get a value higher in the future as compared to the value of that identical amount in today's date. Thus zero-coupon bond trades at a discount to its current value to make it look attractive to investors from a profit perspective.

The age old saying of "dont put all your eggs in one basket" is very applicable when making your investment portfolio. Investing all your money in high volatile assets like stocks and crypto can erode your wealth in the long run during times of uncertainty. Therefore it is always a good idea to follow the 60-40 investment rule, with 60% investment in high-volatile assets and 40% in low volatile assets like that of bonds.

Bonds help you cushion your portfolio and provide you with a steady stream of income in case of volatile financial markets.