How to buy NCDs online or How to Invest in NCDs online has been a big question, I am trying to search the answer myself but in
Before you ask How to buy NCD online, you must know what is NCD and S
Investormust have a demataccount, a depository membership with NSDL/CDSL, anyone dealing with equity investment would be familiar with this term, else one can check with their Bank relationship managers they would put on to the right people to get a demataccount
- Before you buy an NCD/ Corporate bond, you should know the dynamics of it. It is a fixed income instrument issued by corporates with a fixed coupon rate and maturity terms. One need to check the credit rating and risk it poses
- However, NCD or Bond investment is likely to provide a higher return on investment compared to Bank FDs and tax efficient investment especially for individuals with higher tax bracket.
- The coupon rate is the interest each unit gives the investor. However, this is fixed at the time of the offer issue.
- One can buy bonds in the primary market, i.e. the NCD offer period (generally one month and issued first come first served basis). NCD offers come with
openingdate and closing date, investors need to invest wthinthe dates inclusive of both the dates.
- Bonds or debentures are held in dematerialized format.
- One can consider buying bonds from the secondary market, however, it depends on the liquidity (Ideally NCDs should be easily tradeable online, availability of buyer and seller in the trading platform)
- The bond issue generally come with multiple options for no. on investment tenure and interest payout frequency.
- Investors should go through few review of particular NCD issue before subscribing. Unlike breaking FDs, it is not easy to withdraw, one can only sell in the trading platform, depending on the availability of buyers.
- Once you have set your mind and ready with DP ID and membership no. of Demat account,call up your broker, he will share a physical
Appicationform, you just need to fill it up. You do not require to sign a cheque. However, you need to write Bank account No. IFSC code etc in the NCD form. It will be deducted from your bank account once NCD units are allocated to your Demat account. Debentures cannot be bought online just yet, but brokers provide smooth services
So, though it gives higher return than Fixed Deposits, NCD investors need to keep in ind the lock-in (maturity) an risk it carries. First-time/conservative investors should not invest more than 30% of fixed income portfolio (savings account, fixed deposit, NSC, PPF etc). The return is fully taxable.
Few tax exempted fixed income instruments are PPF, EPF and Sukanya Samriddhi Yojana.