What Are High-yield Corporate Bonds?

Corporate bonds can be a reliable source of investment for a few retail investors. The need is to keep in mind the essential factors, advantages, risks, and rewards to avoid disappointment. Retail investors primarily look for investments that can help them earn a high yield on investments. For such investors, choosing to invest in high-yield corporate bonds can be a good decision. A high-yield corporate bond is known to offer a higher rate of interest to the investors, but it carries a higher default risk.

When making your decision of buying high-yield corporate bonds, it is a promising idea to choose an issuer with a AAA credit rating. Make sure you consider the risks and your financial goals. Effective investment planning will help you enjoy a higher yield and peace of mind.

Let us also understand the types of corporate bonds for a better investment decision. Below are the common corporate bond types you can choose for a regular interest income and return of principal on maturity.

Convertible Bonds - are the bond type that has the feature of being converted to stocks of the same company issuing the convertible bond. A convertible bond holder when his/her bonds convert to shares, he/she becomes a shareholder of the company. The issuer is not required to pay interest post-conversion of convertible bonds in stock.

Fixed-Rate Bonds - are a demanding bond type. It is also known as vanilla bonds. Fixed-Rate Bonds are known to pay a predetermined amount as interest income to the bondholders. It features a fixed coupon rate announced at the time of bond issuance. The coupon rate remains fixed until maturity.

Zero-coupon Bonds - These bonds are available at a deep discount. It does not pay regular interest to the bondholders. The principal amount is paid at the time of maturity.

Floating Rate Bonds – it is preferred by the investors comfortable to go for a floating interest income. The interest payment can change every time. The coupon rates are fixed considering the prevailing rate of interest in the market and the issuer’s ability to offer an amount as interest to the investors holding Floating Rate Bonds.

Know Short-Term Corporate Bonds

Short-term corporate bonds are known to offer higher interest rates in comparison to a few investment instruments. You can buy short-term corporate bonds through sources including banks, brokerage firms, or a bond trader in India. It is considered safe due to its short tenure.

A few examples of short-term corporate bonds are Treasury bills, CDs, government bonds, money market accounts, and high-yield savings accounts.

Corporate Bonds Interest Rates

The corporate bond interest rates play a vital role in attracting investors from different sections of human society. Buying corporate bonds is free from hassle and a few minutes process. The online bond platforms namely bondsindia.com and a few more have facilitated secure mediums to simplify bonds.

You can learn about bonds, types of corporate bonds, and more. It will help you expand your understanding of bonds, a fixed income instrument. The varied type of corporate bonds can confuse you. Consider investing in corporate bonds after comparing them all. Credit ratings, face value, tenure, and coupon rate can be considered for comparison to make sure your decision proves fruitful for you.

Before purchasing bonds, keep your Demat account ready and KYC completed. You can complete your KYC online at bondsindia.com in minutes. For a few customers, high yield corporate bonds can be a better choice and for some floating rate bonds can be a key attraction. Experts recommend having a mix of assets in your portfolio to maintain balance in the volatile market. The above information might help you make wise investment decisions and achieve your financial goals.