What Does Bond Mean, Let's Know With Yuva Patrkaar

By Yuva Patrakar Jul 14, 2023, 15:15 IST

Yuva Patrkaar, New Delhi : So friends, you are once again welcome to yuvapatrkaar blog. Today I will tell you what is Bond? Means about Bond Meaning. If you also want to know about Bond, then you must read this post completely.

Because in this I will tell you everything about Bond like what are Bonds. How do Bonds work? Types of Bond, Advantages and Disadvantages of Bond etc. Friends, you must have heard many good things and many bad things about Bond.

You might have also heard that investing in Bond gives very good returns in FD (Fixed Deposit). But in spite of this, people rarely invest in Bonds. The main reason behind this is that most people do not know about Bond.

People do not know how Bonds work. How to invest in them and how to earn profit from it? If you have made up your mind to invest in Bond, then in today's article I will clear all your doubts.

And will give you complete information about Bond. So friends, now without much delay, know. What are these bonds after all? Means about Bond Meaning.

What does bond mean?

Basically friends, doing business is not an easy task, for this a company has to be run and it takes a lot of money to run the company. Whenever a company wants to expand its business, it mainly uses the following 3 methods-

earns money by selling its shares
takes a loan from a bank
Or collects money through Bond

If the company wants to raise money through the stock market, then it has to sell its stake. Which did not win well for any company. Wherein if it comes to taking loans from banks. So banks also ask for a lot of interest rate. After which only one simple, accessible and good way emerges. Whose name is Bond. The company uses Bond to get loans from banks at low interest to raise money from people. Bond means the company is borrowing money from you.

After taking the loan, the company gives you the bond you have bought every year or every month. Will pay interest fixed above its face value. You must also know about the stock market, where share prices keep on going up and down. In the same way, the prices of Bonds also go up and down.

But its interest rate will remain the same as before, that is, you will get interest according to the amount of money you have bought the bond, even if the price of that bond decreases at present. Friends, now you must have understood what is the meaning of Bond?

Some more about Bond..

1. Issuer

A company or government that issues bonds to raise money. He is called the Issuer of that bond. For example, if the Government of India has issued some bonds. So the Government of India will be called the Issuer of those Bonds.

2. Holder

The person who buys the bond. He is called Bond Holder. For example, if you bought the Bonds issued by the Government of India, ie invested in them, then you will also be called the Holder of those Bonds.

3. Face Value

Basically friends, the price of Bonds itself is called Face Value. Which is given to its holder after its maturity. For example, if the face value of a bond is ₹ 100, then when it matures, the holder will get only ₹ 100 instead.

That means the amount you invest in Bond, you will get Bonds of the same amount. Like if you bought bonds worth Rs 1,000 and if the face value of those bonds is Rs 100. So then you will have a total of 10 bonds.On maturity of these bonds, you will be given 100 rupees for each bond.

4. Maturity Date

Maturity Date is that date. The day the bond matures. All the bonds you have bought on this day. You can withdraw your invested money by handing it back to its issuer.

It is exactly the same as – the day your FD matures. And immediately your money is transferred to your bank account. Its maturity date is written on each bond.

5. Coupon Rate

The rate at which interest is paid to the Bond Holder. It is called Coupon Rate and this interest is received on its face value.

For example, see if the Coupon Rate of a bond is 8% and the Face Value of that Bond is Rs.100. So he will be given an interest of Rs.8 every year at the rate of 8%.

6. Yield

Bond Yield means. The total return received by the buyer of the bond at the time of its maturity.

Types of Bond

Friends, you have come to know the Bond Meaning, but now I will tell you how many types of Bond are there. So friends there are mainly three types of bonds-

1. Government Bond

Government Bond in India is considered very safe. Because as long as the government is here. Till then there is also Bond. Bonds will sink only when the government sinks, but this is impossible to happen. If ever Bonds sink, it will be saved by the government.

2. Corporate / Private Bonds

In such bonds, the government does not have a full share, but most of the share is with the government. It is not considered very safe as compared to government bonds but it is less risky. Due to which there are possibilities of getting more profit.

3. Public Sector Bond

These types of bonds are issued by private companies. Some companies are good in this. So some are very high risk. Investing in them is considered a bit more risky than other bonds.

Advantages of Bond

The way the prices of poets keep fluctuating a lot in the stock market. But there are very few ups and downs in Bond. It gives you stability.
Bond is a type of loan. Because of which you get a Fixed Amount interest every year from the Bond Issuer.

Disadvantages of Bond

This is its biggest disadvantage. In Bond, sometimes the principal amount is not given back to you. This mostly happens in private bonds only. The company sinks completely and does not even give your money.
You cannot sell even if you want to, this is also because people do not invest much in it. That's why when you go to sell it, you will find very few buyers. Due to which you may have to wait till Redemption Year also. But nowadays people have started showing interest in Bonds. Because of which you can sell it anytime.
Whatever Bond you have bought. Its next year comes at an interest rate higher than that. So this has a great impact on your interest rate.

How to buy and sell Bond?

There are many ways and sites to buy and sell bonds, one of them is Thefixedincome. These sites are regulated by SEBI. Which helps in buying Bond. Whatever bond you buy, it will be stored in your Demat Account only.

All you have to do is give your DP ID at the time of registering here. One advantage of this would be that tomorrow if these websites are there. It will not make any difference to you or not because your Bond will remain in your Demat Account. You can also buy from here and sell easily.

Is it right to invest in Bond?

If you are not happy with Bank FD. And you want to earn on a regular basis and you want to stay away from the volatility of the stock market, then you must invest in Bonds. There is nothing wrong in investing in it.

This enables companies to raise money. And expands itself, due to which there is growth in the business of the company. And the investors who have invested in it also get very good benefits.

Frequently Asked Question

1. What is Bond Meaning?

Bond means that the company or government is borrowing some money from you.

2. Is Bond Illegal?

No, Bond is not illegal, it is completely legal.

Conclusion

So friends, in this article I told you about Bond Meaning. I hope you liked this article and you got to learn a lot from it.