Understand income options, issuer quality, maturity and liquidity before choosing a fixed-income instrument.
A bond is a loan to an issuer such as a government or company. Its terms specify how interest and principal are paid. Fixed income describes the instrument structure; it does not mean every investment has guaranteed returns or a stable resale price.
Government securities, corporate bonds and fixed deposits have different issuers, terms and risk profiles. Compare the actual instrument rather than treating them as interchangeable. Availability depends on the issuer and distribution channel.
Review purchase price, yield, maturity, payment frequency, fees and any early redemption or call provisions. A coupon rate is not the same as your effective return when a bond is bought above or below its face value.
An issuer may miss payments or default. Market prices can fall when interest rates rise. A bond may be difficult to sell at a reasonable price before maturity. Credit ratings help assess risk but do not guarantee repayment.
Consider when you will need the money and whether regular income or a maturity amount is more useful. Review concentration across issuers and the effects of inflation. Confirm current tax treatment and instrument documents before committing.
Learn more: SEBI: understanding bonds.
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