FDs AND BONDS

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FDs

A Fixed Deposit (FD) is a simple and structured way to invest a specific amount for a chosen period at a predetermined interest rate. It offers clarity on the tenure and applicable interest rate from the time the deposit is opened, making it an option for individuals who prefer a defined investment period and interest rate. Depending on the scheme, interest may be received at regular intervals or accumulated and paid at maturity.


FDs can be considered based on an individual’s financial requirements, liquidity needs and investment horizon. Interest earned on Fixed Deposits is generally taxable in accordance with applicable tax laws. Certain FD schemes may offer preferential interest rates or other benefits to eligible senior citizens, subject to the applicable terms and conditions.

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Bonds

A Bond is a debt security, in which purchasing a bond is nothing but lending money to an authorized issuer for a specific period at a specific rate of coupon (interest). It is a formal contract to repay borrowed money with interest at fixed intervals (semi annually, annually, sometimes monthly). Thus a bond is like a loan, the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor) and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments or in case of government bonds, to finance current expenditure. Govt. of India is the biggest issuer of Bonds. Bond market is much bigger than equity market.

Interests earned from bonds are taxable & includes in your Interest income. Bonds are generally used by investors to offset some of the risk in their portfolio. So, by adding bonds to your portfolio you can mitigate some of the risk you’re taking in stocks by having stable income from bonds.

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