A bond is a debt instrument issued by the government or a corporate house to raise funds from the markets. A bond has a specific maturity date which can range from a few days to many years. Based on the maturity period, it can be a short-term bond or a long-term bond.

   A bond has a fixed maturity value. It is based on the type of bond. There may or may not be regular interest payments, known as coupon payments. Large institutions such as banks, mutual funds and foreign funds are some of the large investors in government and corporate bonds.

   Individual investors mainly invest in bonds taking the debt-based mutual funds route, or directly in corporate bonds or tax-saving bonds.

Who should invest in bonds?    

All investors should have some exposure to bonds. The percentage of allocation to bonds can vary based on the risk profile of the investor. Including debt-based instruments brings stability to the overall investment portfolio of an investor.