Corporate bonds have been one of the
favorite investment options for so many investors from a long time.
The reason behind such a favorable inclination of investors towards
corporate bonds is the benefits that triumph over other bonds.
There are so many superior advantages
that corporate bonds possess over other bonds such as,
Liquidity
Many corporate bonds are traded in the
secondary market. Trading in a secondary market means that the
investors can trade corporate bonds in a security exchange and draw
money against the transaction. Corporate bond prices are
fluctuating in nature when they are traded in the secondary market.
Investors can sell these bonds for gain when live bond prices
are higher than the book value. Additionally, people can buy these
bonds when they are traded at a lower price than the book value and
may generate profit in the future.
Dependable income
Most corporate bonds offer a structured
payment schedule. Such a predictable payment schedule provides
immense flexibility for investors to plan their financial goals. A
corporate bond is a suitable medium of investments for people who
want a dependable source of income.
Higher returns
Corporate bonds offer higher returns of
investment in comparison to government bonds. However, they also
possess a high risk of losing investment money associated with them.
Interestingly, if calculated risks are taken by consulting with
market experts, it can generate a good amount of profit.
Diversification
At the time of selecting a corporate
bond, a person has option to choose his bonds from a large pool of
companies that are working in diverse sectors. An investor can select
to buy bonds of a known company. Alternatively, he can select a
corporate bond from a familiar industry. Having diversity provides
flexibility to the investors.
Easily convertible
In order to retain the money of the
investors, some companies offer to convert the bonds into stocks of
the company. The benefit of such an offer for companies is that they
do not lose their capital. At the same time, the borrowed fund is
converted into owner’s fund as the bondholders are converted into
investors of the company.
