What are Government Bonds? How To Invest In Government Bonds?

Government Bonds are debt instruments issued by the Government of India, both the State Government and the Central Government. The Government of India issues Government Bonds when it faces a liquidity crisis and needs funds for national spending. The Government Securities issued by the State Government are known as State Development Loans (SDLs)

A Government Bond is a contract between the investor and the issuer where the issuer guarantees the investor interest earnings on the face value at which the bonds are issued, along with the guarantee of the repayment of the principal amount invested on a specific date.

Government Bonds in India are broadly categorised as Government Securities (G-Sec). They are fundamentally long-term investments issued for periods ranging between 4 to 40 years. Some examples of the various types of Government Bonds are Fixed Rate Bonds, Inflation-Indexed Bonds, Floating Rate Bonds, Sovereign Gold Bonds, Zero Coupon Bonds, Treasury Bills, and Bonds with Call or Put Action. Each Government Bond type has a different investment objective and unique features.?

How To Invest In Government Bonds?

Step 1: Hire a Reliable Financial Intermediary

If you are beginning your investment journey, then it is advisable that you research and hire an experienced and reliable financial intermediary to help you through the process of buying and exiting Government Bonds. A financial intermediary with in-depth knowledge about various Government Securities and how they operate is who you essentially need to hire so that your investment across multiple government bonds is hassle-free. You can talk to Eureka to understand your eligibility to invest in Government Securities.

Step 2: Check Investment Eligibility and Complete KYC

Once you have signed up with Eureka, your financial asset manager will check whether you are eligible to invest in Government Bonds. Once your eligibility has been confirmed, you shall be required to complete all KYC formalities with Eureka. Usually, KYC compliance can be done easily online.

Step 3: Open a Demat Account

Once your KYC formalities have been completed, your Financial Asset Manager from Eureka shall guide you through the process of Demat Account Activation if you are a new investor. If you already have a Demat Account, you shall be required to inform them about the same to align your investments and monitor them effortlessly.

Step 4: Government Bonds Investment Option Discussion

Once all formalities have been completed, your asset manager will schedule a meeting with you to educate you about various Government Bonds, including the different types of Government Bonds, ?their individual investment objectives, returns, and risks. In this meeting, your financial asset manager will also assess your financial goal, budget, expected returns, annual income, and risk appetite to suggest to you the right kind of Government Bonds to invest in.

For example, if you want to invest in bonds that help you hedge against rising inflation in the economy and you have enough funds to lock away for a couple of years, your asset manager shall suggest you invest in Inflation-Indexed Bonds.

Step 5: Actual Investment in Government Bonds

Based on the discussion between you and your financial asset manager, team Eureka will chalk out a suitable Government Bond Investment Plan. Based on this plan, every time RBI issues any kind of Government Bonds, you shall be intimidated about the same. Once you approve of allocating your funds to Government Securities, your asset manager will participate in the Non-Competitive Bidding of Government Securities and invest on your behalf.

Step 6: Investment Monitoring

Once you have invested in Government Securities, you can monitor the performance of your investment. You can see your funds grow. Eureka helps you monitor your Government Bond Investment online without any hassle. You can also acquire assistance from your dedicated financial asset manager for fund management.

Step 7: Withdrawal of Funds

As per the regulations of RBI, the interest earned and accrued on Government Bonds is disbursed to debt holders every six months. Based on the Government Bond type you have invested in and the terms of withdrawal associated with it, you can withdraw your earnings.

While Government Bonds does come with some inherent risks, their advantages overshadow their drawbacks. Now that you know how to invest in Government Bonds let us tell you some advantages of investing in government bonds.

• Government Bonds are a regular source of income
• They are inflation Adjusted Investments
• Government Securities come with a sovereign guarantee. This means they are safe investments.
• These bonds are Highly Liquid Investments.
• They help in investment portfolio diversification and risk adjustment.

You can Connect With Our Team to invest in Government Bonds and reap the benefits of these sovereign investments. Team Eureka is always happy to help.