List of Corporate Bonds

These bonds are issued by private organisations in return for capital for growth and development. When you buy a bond, you lend money to the organisation and get interest on your loan amount.

To understand how corporate bonds work, let’s compare them with equity. Now if you invest in the equity of a company, you become a part owner of the company, get voting rights and become eligible to receive dividends. But if you purchase corporate bonds, you are providing a loan to the company, which makes you the company's creditor. So, you will receive fixed interest on your investment at regular intervals. Apart from that, you are entitled to get the principal at maturity or as per the pre-determined schedule, irrespective of the fact that the company is making profit or loss and also not dependent on the price of the company's equity shares.

• Fixed income: Like any other bond, corporate bonds provide interest to bondholders as fixed return which might be a good regular income stream.
• Credit quality: Credit agencies are responsible for providing ratings of corporate bonds based on the issuer's ability to repay debt obligations. A good rating means the issuer is more likely to meet its obligations under the corporate bonds held by the investor. Credit ratings allow investors to make informed decisions considering the risk involved in corporate bonds.
• Maturity dates: Typically, Corporate bonds have fixed maturity dates or payout dates, giving investors an idea of when they will receive their principal and/or interest back. It comes in handy when investors need to plan for their future goals.
• Potentially higher returns: Corporate bonds are comparatively riskier than FDs and hence they also offer higher returns compared to FDs.

• Fixed Income - Typically, Corporate bonds provide a regular flow of income in the form of interest. The interests are paid at fixed intervals (monthly, quarterly, half yearly, etc), allowing investors to plan their regular expenses more efficiently.
• Capital Appreciation - Corporate bonds can also offer the potential for capital appreciation. If interest rates decline or the issuing company's creditworthiness improves, the bond market value may increase as bond value is inversely proportional to market interest rates. This can result in capital gains for investors who sell their bonds at a higher price than the purchase price.
• Higher return than other debt instruments - Corporate bonds provide higher returns than government bonds and other debt instruments. But it also carries a higher risk owing to the issuer's creditworthiness compared to FDs and government bonds.

• Market and economic risks: Corporate bond prices are influenced by economic factors, sector-specific issues, the global markets, and economic downturns. For example, investors demand higher returns during market volatility, negatively affecting bond prices. Also, an investor may lose money in case of any fraud by the issuing company.
• Inflation risk: Corporate bonds are usually impacted by inflation risk, which might potentially erode purchasing power of an individual. If the inflation rate exceeds the return on corporate bonds, the real return can be negative. Inflation decreases the future value, thus, reducing the purchasing power of the investor from the bond's cash flows.
• Liquidity risk: There is a risk of not finding a buyer when the investor wishes to sell a corporate bond due to lack of transparency in pricing like stock market.
• Limited upside potential: While corporate bonds provide regular income in the form of interest payments, their upside potential for capital appreciation may be limited compared to other investments such as stocks. The returns from corporate bonds are primarily driven by the coupon payments and changes in interest rates, rather than the growth potential of the issuing company.

Investors looking for exposure to the market can consider investing in corporate bonds. This is because corporate bonds offer stability and income, two key factors to look for when making an investment decision. Also, Investors who are looking for an alternative to traditional fixed-income instruments can consider corporate bonds. This is because corporate bonds offer higher interest rates than government bonds and fixed deposits and are less risky than equity investments.
Finally, investors who want to diversify their portfolios can also consider investing in corporate bonds.