Nivesh Bee

What is a Fixed Deposit?

Fixed deposit investment options are offered by banks to meet the needs of both the short term as well as the long term investors. Fixed deposits come along with a lot of benefits as well. The best part about investing in fixed deposits is that you will get a guaranteed return on your investment. Moreover, investing in a fixed deposit is tax-free. Apart from being tax free, fixed deposits provide flexibility to investors as they allow them to choose the investment tenure and the investment amount of the FD. Based on your investment, you may be eligible for a loan against your FD. In the event of an emergency, you can close your Fixed Deposit and withdraw the funds right away. Talking about the tax benefits, if you invest for five years in tax-saving fixed deposits, you will be eligible for a number of tax benefits.

FDs are a popular savings instrument that banks offer where an investor invests a lump sum amount of money at a fix rate of interest for a certain period of time. Since it assures a return on the investor’s investment, it is one of the safest investment options available in the market today. Rising inflation has no impact on the returns as the establishment of rate of returns on FDs is done by the Indian government.

What is a Corporate Bond?

Corporate bonds are a form of Debt securities. Both public and private companies issue corporate bonds. There are several types of bonds that companies issue and they are also known as Non-Convertible Debentures (NCDs). Firms and companies raise funds for their operations, future expansions, and growth possibilities. They either use debt or equity to raise funds. Generally companies prefer issuing debt securities since it does not compromise their shareholding structure. Companies generally do not opt for bank loans as they are expensive. Therefore companies raise capital by issuing bonds or debentures, which is comparatively less expensive. There are times when a company puts up its assets as collateral.

When you buy a corporate bond security, it simply means that you are lending your money to that company. Therefore, the company will repay the principal upon maturity. Also, the company pays interest on the borrowing; people know this as the coupon. Generally, a company makes coupon payments twice a year.

FD & Bonds