Who Should Invest in Bonds?
Bonds are suitable for investors who have low-risk tolerance levels. Bonds are safer investments as they carry less risk as there is an assurance of principal and interest payment after a specified duration. Also, for these securities collateral backs them, which ensures investors will receive their payment on maturity. Thus, bonds can act as a long term investment option for investors who do not have experience in the stock market.
Typically, bonds carry risk compared to fixed deposits. However, investors should consider the inflation risk and interest rate movement, which may cause the investments to change their value over time. Also, investment in bonds can help investors generate a steady source of income. Furthermore, it helps them diversify their investment portfolio through these instruments.
Who Should Invest in Fixed Deposits?
Investors who prefer investing in a risk-free investment instrument can consider fixed deposits. The investors know the returns from fixed deposits in advance. Therefore, market fluctuations do not hamper the returns of fixed deposits.
There are many market-linked instruments available for investors which offer higher returns. However, they involve high market risks. To ensure balanced financial growth, investors should also consider safe investment options. Hence, fixed deposits are safe instruments and lead to guaranteed returns if they are from credible financial institutions.
