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Zero-coupon bonds

Zero-coupon bonds are a great investment choice if you are looking for a low-budget investment option available at a lesser risk. To conveniently buy zero-coupon bonds,

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Zero-coupon bonds

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  1. Zero- coupon bonds

  2. IsZero-couponbondsrightinvestmentoption foryou Bondsareapopularwaytoadddiversificationtoyourinvestmentportfolioandspreadtheriskonyour investments. In this article, we are going to get into the depth of zero-coupon bonds and understand how zero- couponbondswork. Understandingzero-couponbonds Popularly known as zero-interest bonds, zeros, or accrual bonds, these bonds are different from usual bonds as they do not provide the bondholder with any interest or coupon during their lifetime. Instead of the usual interest payment,youcanbuythesebondsata heavydiscountfromtheirfacevalue andgetthefacevalue amountonthe maturityofthebond. Zero-coupon bondsareusuallyissuedfora longtermthatmayextendforupto10to15yearsorevenmore. The priceofzero-couponbondsfluctuatesmuchmorethanotherbondsinthesecondarybondmarketsincethere is nointerestpaid onthesebonds. Thereturnorprofitonzero-couponbondsisthedifferencebetweenthepriceatwhichyoupurchasethezero- couponbondandtheparvalue ofthebondthatyouwillreceiveonitsmaturity.

  3. IsZero-CouponBondagood investmentchoice? • Eventhoughzero-coupon bonds do not offer interest during theirlife,theycanprovetobeasmartinvestmentchoicedue toseveralreasons.Let’shavealookatthem: • Thesebonds comewitha long-termmaturitydate.This means that if you invest in zero-coupon bonds, you can plan foryourlong-termfinancialgoalswiththesebonds. • Since these bondsare availableat heavydiscounts, you need not shell out a huge amount of money to buy them. Even if your investment budget is small, you can buy deeply discounted zero-coupon bonds and watch your investment growovertheyearstill itsmaturity. • Since you buy these bonds at a discounted price, they offer you a higher payment on their maturity, compared to other bonds.

  4. Also, as these bonds do not offer interest, there is no question of reinvesting. This does away with the reinvestment risk on these bonds, making them much safer than other investment options. • Zero-coupon bonds are only subject to capital gaintax and the bondholders need not pay any tax on the interest as these are tax-freebonds. • HowtobuyZero-CouponBonds • Brokers: You can open a Demat and Trading account with a registeredbrokerand buyzero-couponbondsthroughthem. • Online Platforms:Toinvestinzero-couponbonds online, youcanvisitany leadingonline bonds platform likeBondsIndiaand make informed decisions while investing yourmoney. • NSE and BSE Apps: Youcan buy the government-issued zero-coupon bonds through the mobile or web-based apps of NSEandBSEusingtheservicesofafacilitatoror aggregator.

  5. RBI Retail Direct Scheme: The RBI Retail Direct Scheme is a recently launched scheme by the RBI through which you can buygovernment-issuedzero-couponbonds. • Zero-coupon bondsareagreatinvestmentchoiceif youare looking for a low-budget investment optionavailable at a lesser risk.Toconvenientlybuyzero-couponbonds,clickhere.

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