With each passing year, investment options are continuously rising up. Nowadays, there are hundreds of investment options available in the financial market. We can also distinguish them as per the risk and return factors. If the classification happens at a broad level, the Government Bonds section comes under the low-risk category. This article will present an entire detail regarding Government bonds along with a special reference to Zerodha Coin. So, let’s begin the article to get the answer to How to Buy Government Bonds Online in Zerodha?
What are Government Bonds?
People generally say that the Government of India is the safest debtor in the country. Government security not only provides securities but also acts as a tax saver option. As the name suggests, Govt bonds are a debt-based investment, issued by Govt to support Govt spending. Investors who have Govt security, are paid a periodic interest payment by Govt. Govt mainly uses the raised fund for new projects or infrastructure. Whenever investors buy bonds, they lend the agreed money to Govt for a certain period of time. In return, Govt will pay them back at a regular interval of time, known as the Coupon rate. After the expiration of bonds, they will get the main principle on the maturity date. Each bond has a different maturity date.
Government Securities vs Bank Fixed Deposits
In order to clear the concept of How to Buy Government Bonds Online in Zerodha more clearly, let’s have a quick look at the reasons for choosing Government securities above Bank Fixed Deposits. One thing must be clear to you in Govt Sec also, there are multiple investment options like bonds. T-bills etc.
If you look at the above attachment carefully you can notice the difference in return between G-sec and Bank FDs. The reasons to choose G-sec are as follows:
- Sovereign Guarantee Investment: The G-Sec investments are guaranteed by Govt. of India. This Sovereign Guarantee is one of the main distinctions between G-sec and other fixed securities like bank FDs.
- Better Returns: These particular securities offer attractive interest rates, unlike FDs.
- No TDS: There is no tax deduction in this. The securities come under the tax saver instruments.
Why Buy Government Bonds Online?
With advanced technology, it’s become easier to buy govt bonds online. There are multiple advantages to buying govt securities online. These are as follows:
- The charges are quite low if you choose to buy govt-sec online by yourself rather than buying it via any fund manager.
- The buying process is easier in comparison to offline.
- Moreover, you can see the whole scheme’s facilities and features online.
How to Buy Government Bonds Online in Zerodha?
Here, we’ve come up with an entire detail of How to Buy Government Bonds Online in Zerodha. Firstly, you need to Open an Account in Zerodha, one of the most popular low-cost brokerage firms in India. Only after opening an account in Zerodha, you can access FREELY Zerodha Coin.
Introduction to Zerodha Coin
Zerodha has taken an innovative initiative by launching Zerodha Coin. Zerodha Coin is such a platform by which you can invest directly in the mutual fund, gov-sec like bonds, treasury bills, etc. Every week the exchanges open a non-competitive binding window for Govt Sec. From Monday to Tuesday, bids for T-bills are collected and bonds are collected from Tuesday to Thursday. After the successful allotment, we will automatically get the credit of G-secs to the Demat a/c. The bank account will also credit interest at a certain periodic interval.
Process of Buying Government Bonds Online
After opening an account in Zerodha, you will be able to see the dashboard window of Zerodha coins. There you get different options for investment in G-Sec like T-bills, Bonds, etc.
The best government bond to buy depends on your financial goals, investment time horizon, and risk tolerance. For a conservative approach, anytime investors may consider investing in a short-term bond of less than 3 years of maturity. Longer-term bonds can also be beneficial but need careful consideration before investing.
Yes, you can purchase most types of Indian government bonds from banks directly or through brokers as registered intermediaries with the regulator SEBI (Securities & Exchange Board India). Alternatively, issuers such as NCDs and mutual funds may also provide access to different kinds of exotic Government Bonds like treasury bills or other savings instruments.
Generally speaking, longer-term Government Bonds tend to offer higher returns in comparison to shorter ones due to an extended period during which investors are exposed to opportunities for growth potential and increased income over time. However, this type of instrument comes with bigger levels of market risk so we must not undertake them lightly.
Currently, the five-year Government Bond yield In India stands around 6%. However, it’s subject to variations depending on economic performance throughout its duration until maturity when original capital should be returned alongside any pre-agreed reward payments collected along its life cycle.
In conclusion, we have discussed that Government bonds are one type of debt instrument. We have also checked the difference between these Govt bonds with Bank fixed deposits. Lastly, these bonds are very easy to invest in with the Zerodha Coin Platform. Happy Investing and Happy Coining!