Government bonds are fixed-income securities issued by the government to raise funds for various public sector projects and initiatives. They offer a secure investment option with predictable returns, making them a preferred choice for risk-averse investors.
These bonds are backed by the government\'s creditworthiness, ensuring minimal risk of default. Investors receive periodic interest payments, also known as coupons, and get back the principal amount at maturity.
Types of Government Bonds
- Treasury Bills (T-Bills): Short-term bonds with maturities of up to one year, issued at a discount and redeemed at face value.
- Government Securities (G-Secs): Long-term bonds with maturities ranging from 5 to 40 years, offering periodic interest payments.
- Sovereign Gold Bonds (SGBs): Bonds linked to gold prices, allowing investors to gain exposure to gold without physical possession.
- Inflation-Indexed Bonds (IIBs): Bonds that adjust interest payments based on inflation rates to protect against rising prices.
- Tax-Free Bonds: Bonds issued by government-backed institutions, offering tax-exempt interest income.
Key Features:
- Low Risk: Backed by the government, these bonds carry minimal credit risk.
- Fixed Returns: Investors receive stable and predictable interest payments.
- Liquidity: Certain government bonds can be traded in secondary markets, providing liquidity.
- Tax Benefits: Some bonds offer tax exemptions on interest earnings.
- Long-Term Investment: Suitable for wealth preservation and financial planning.
Government bonds provide a reliable investment avenue for individuals seeking stability and assured returns. With diverse options catering to different financial goals, they serve as a secure addition to any investment portfolio.