The information provided are for general consumption only. Do not construe this as an offer/advice/research to buy/sell any securities

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Floating Rate Bonds

Floating rate bonds have a rate of interest that is not fixed and changes over time. Typically, a floating rate bond’s interest rate is tied to an external benchmark interest rate. For example – The RBI’s floating rate bond’s interest rate is tied to the interest rate of NSC or National Savings Certificate and is always 0.35% higher than the NSC interest rate. The advantage of investing in floating rate bonds is that their price volatility is very low. However, floating rate bonds work against the investor when interest rates are falling. This makes them a double-edged sword.

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Bonds are investment instruments that represent a loan made by the investor to a borrower like a corporate or government. The borrower borrows money for a stipulated period of time during which it pays interest to the investor. The loan (or principal) is returned to the investor at the end of the period which is denoted by the bond's maturity date.
Bonds are considered to be safer than equity or stocks. Bond investments should be considered by investors who have a low risk profile or who want to diversify their investments beyond stocks.
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Invest in safer portfolio without compromising returns.

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