Bonds are fixed-income securities that help investors with portfolio diversification. It is a covenant between the investor and the issuer. The investor is paid interest for a specific time period until the maturity. At the end of the tenure, the investors receives their invested money back.
The bonds can be bought online as well as offline. If you wish to purchase online, you will need a DEMAT account where the bonds will be deposited. In an offline purchase, a certificate of holding is delivered to the registered address.
First, you will need to ensure the bond is over its lock-in period or make sure it does not have one. The bonds can be sold in the secondary market among investors before the date of maturity. There are factors that determine the price of the bond at the time of sale, such as the interest rate in the market. If the interest is high, the market value of the bond will fall. Likewise, if the interest rate falls, the market value will be high.
A Demat account is not mandatory to purchase a sovereign bond. However, holding your securities in a Demat account makes selling easy. The investment market is growing as we speak, hence it is not possible to have a physical copy of all your investments and transactions. Therefore, Demat account prevents hassles and gives you a digital lay down of your investments in one place.
A Demat account is short for Dematerialized account. It is a trading account where all your investments are deposited. Since acquiring a physical copy every time you sell or purchase is not possible, a Demat account keeps track of all your activities as an investor. It converts securities from physical to digital form.
Managing a Demat account is a chargeable service. However, there are services like National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL) that offer a free Demat account.
