Should You Invest In Government Bonds Directly?
In February 2021, the Reserve Bank of India announced that it would open up these bonds for small investors under its ‘RBI Retail Direct’. Thereafter, in July 2021, the RBI released guidelines for the scheme. As a result, retail investors can open a ‘retail direct guilt’ (RDG) account with RBI in a few simple steps online and start trading in government bonds.
In addition, the central bank’s online portal will allow institutional investors to access its bond trading platform. Retail investors can also bid for government bonds by way of primary auctions like large institutions do. However, the starting date for this RDG account is yet to be announced by the RBI.
Before the date is announced and you arrive at a decision, let’s understand whether government bonds are suitable for you.
Why Should You Invest In Government Bonds?
Government bonds offer numerous advantages to investors, such as the following:
Government bonds are perhaps the least risky investment option since they are backed by sovereign guarantee. Accordingly, there are minimal chances of investors losing out on their capital.
Usually, rates of returns from these bonds are more or less similar to those from bank deposits. In addition, they offer a guarantee of principal repayment alongside fixed interest pay-outs. Moreover, government bonds are available for a much longer duration, unlike bank deposits.
According to RBI guidelines, interest accrued on these bonds is to be disbursed to bondholders every six months. Resultantly, government bonds allow bondholders to earn regular income.
Government bonds balance the risk of your overall portfolio. Therefore, investment in these securities lets you have a well-diversified investment approach.
However, government bonds do not offer returns as significant as their corporate counterpart. Investors looking to mop sizeable risk-adjusted gains can browse corporate bond options by signing up with platforms such as KredX.
In case the aforesaid government bond features bode well with you, read on to know how you can invest in the same presently.
How To Invest In Government Bonds?
Currently, you can subscribe to government bonds in the following ways:
- NSE: If you wish to buy government bonds, you can do so via the online portal of the National Stock Exchange.
- Mutual Fund Or ETF: Investors aiming to diversify their portfolio by investing in multiple government bonds can go for gilt funds or ETFs.
- Broker: One can also buy bonds online from certified brokers. However, bond prices tend to vary from one broking agent to another.
You can also consider investing in corporate bonds through third-party platforms such as KredX. Plus, given the variety in investment channels, it is now extremely easy for investors to buy bonds online.
How To Invest In Bonds Online?
You can invest in bonds via online platforms in the following manner:
Step 1: Log in to the official portal of the preferred online platform.
Step 2: Go to the ‘Bonds’ tab.
Step 3: Browse through the available bond options. Then, choose a bond that suits you best.
Step 4: Select the number of units you wish to purchase.
Step 5: Select the option ‘Book Now’.
With these simple steps, you can invest in bonds by way of an easy and hassle-free procedure. However, as the entire process takes place digitally, you need to visit investment relationship managers in person. Instead, the relationship manager will reach out to you via a phone call and complete your bond investment.
Investors can soon buy government bonds by opening a retail direct gilt (RDG) account with the Reserve Bank of India. However, one must consider their investment horizon and financial goals before selecting a government bond.