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Lesser volatility AND higher returns?

Yes! NCDs and bonds make it possible.

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More liquidity | Controlled Risk | Tax Benefits

What are NCDs and Bonds?

A Non-convertible Debenture (NCD) is a financial instrument, in the form of a public issue, that is used by companies to raise capital for various purposes. NCDs are primarily debt instruments. They have a fixed tenure and people who invest in these receive regular interest at a certain rate. The payouts can be monthly, quarterly, or annually. On maturity, the investor (debenture holder) is paid the principal amount. Some debentures can be converted into shares after a certain period of time. However, this is not possible in the case of NCDs. That’s why they are known as non-convertible.

Bonds are fixed-income securities. The investor lends money to a company or a government for a specific period of time. In return, the investor will get regular interest payments. Once the tenure is completed or the bond reaches maturity, the bond issuer (borrower) returns the investor’s money.

Here’s how you can invest in NCDs and Bonds

Once can either subscribe when a company (issuer) announces an NCD, or buy it from the secondary market when it is trading. But if you already have a demat account with Marwadi Financial Services, you can apply through us as well:

  • Step
    1

    Go to the Investment section and select the desired NCD
  • Step
    2

    Select ASBA (Applications Supported by Blocked Amount) and NCD
  • Step
    3

    Enter the NCD details and submit your application

Similarly, you can invest in bonds with Marwadi Financial Services here.

Differences between NCDs and Bonds

 

  • Security: Bonds are always secured by the collateral or physical assets of the issuer. Debentures can be either secured or unsecured. Thus you have to depend solely on the reputation of the company.
  • Tenure: Bonds are long term investments and their tenure is generally higher than debentures. Debentures can vary from short to long term investments. Comparatively, their tenure is lower than bonds.
  • The issuer: Bonds are issued by large corporations, financial institutions, and government agencies for their long term capital requirements. Private companies are the ones that generally issue debentures for their capital requirements.
  • Interest rate: Since bonds are backed by collateral, they offer a lesser interest rate as compared to debentures. The interest rate can be floating or fixed. Debentures, thus offer a higher interest rate but are less stable in terms of repayment.
  • Liquidation: Bondholders will always get priority for repayment over debenture holders in case a company goes bankrupt or is on the verge of liquidation

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Benefits of investing in NCDs and Bonds with Marwadi Financial Services

Benefits of NCDs

Higher returns

NCDs, secured or unsecured, provide a higher interest rate to their investors, as compared to bonds.

Good liquidity

As NCDs are listed on the stock market, they are easier to withdraw. Compared to selling regular stocks, redeeming your NCD investment may be a little tougher, but they are definitely more liquid than bank fixed deposits.

Tax exemption

 As per the provisions of Sec 193 of the IT Act, no tax is deducted at source.

Diversification

NCD investments add diversification to your portfolio with considerable income security.

Benefits of Bonds

Regular/ fixed income

Bonds offer one of the most stable cash streams. Even during such times when the rates are low, there are plenty of options available that can meet your income needs. A great advantage of a strong bond portfolio is that it can provide decent yields with a lower level of volatility than equities.

Stability

Bonds are debt instruments, whereas stocks represent equity ownership. Investing in debt is relatively safer than investing in equity. Why? That’s because debtholders are given priority over shareholders in crisis situations. For instance, if a company goes bankrupt, debtholders (creditors) will be paid before the shareholders.

Diversification

Bonds can help you with better risk-adjusted returns and thus diversify your portfolio. More importantly, bonds can act as an instrument to preserve capital for equity investors during times when the stock market is falling.

Preserving the principal amount

Capital preservation is one of the core advantages of investing in bonds. Fixed-income investments like bonds are especially useful for people who might need access to a large sum of money in the near future. For example, someone who is within five years of retirement.

Frequently Asked Questions

Stocks and Equity are similar; they denote the ownership of a company. The online stock trading exchanges allow investors and traders to trade in Stocks and Equity. Stocks are securities bought and sold in the market. Equity is defined as a stake in a company.

AMC stands for an Asset Management Company that creates a pool of funds by collecting money from the public and uses the capital on various investments that involve  Real Estate, Stocks, Bonds, Real Estate, etc.

Investors can generate high returns through equity investment. They can make profits through dividend earnings as well as capital appreciation.

Online share trading allows investors to trade in shares of companies on the National Stock Exchange and the Bombay Stock Exchange (BSE).

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