When it comes to safe and stable investment options, NCDs (non-convertible bonds) and bonds are among the best of ncd options for investors. Both provide fixed income and low risk compared to equity. But how do you decide which one is better for you? Here are important factors that each investor should consider before making an alternative.

1. Understand the basics

•     Bonds equipment has been issued by authorities, public sector companies or companies to obtain bond capital. In turn, the issuer promises to pay interest on a regular basis & return to the principal at maturity.
•      NCDs are similar to bonds, but are issued only by companies (not authorities). They cannot be converted to shares, as opposed to convertible bonds.

2. Issuer and Credit Risk

• Government bonds are considered the safest, without any risk of default.
• Business bonds and NCD -issuing companies are taking credit risk based on financial health.

3. Interest Rates (Coupon Rate)

•      NCDs often offer higher interest rates than bonds-which to attract investors.
•      Government bonds usually have low returns, but come with high security.

 If you require high returns and take moderate risk, NCDS can suit you.

For returns, bonds are a better option.

4. Taxation

• Both NCDs and bonds are taxed according to your income plate if kept to maturity.
• If the secondary market is sold before the due date, the capital gain tax is used.

5. Tenure and Lock-in Period

•      Bonds can provide short or long-term options.
•      NCDs often come up with a locker, making them less flexible for short-term investors.

6. Investment Goals

Choose based on your financial goals:

Conclusion

Both NCD and bonds are excellent investment options for interest rates. Your decision should depend on risk tolerance, withdrawal expectations, liquidity needs, and financial goals. For beginners or conservative investors, it may be safe to start with state or PSU bonds. For experienced investors seeking high returns, it may be a good strategy to invest in well-assessed NCDs.

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