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How to Invest in Fixed Income Securities?

Every person wishes to build a sufficient corpus for himself/herself so that they or can have a peaceful life in their retirement.
One of the ways by which investors can do this is by investing in fixed-income securities.
In Asia, the Indian debt market is considered one of the largest. 
The instruments in the debt market are mainly issued by central/state governments, corporates, banks, and financial institutions.
The Indian debt market mainly comprises the Government of India securities.
The corporate bond market is also fast developing with increased participation from financial institutions, banks, provident funds, mutual funds, High Net worth Individuals, and Retail participants. 
As per a report, in 2025, the corporate bond market might reach Rs. 65-70 lakh crore from Rs. 33 lakh crores in 2020.
As per a Morgan Stanley report, in early 2022, India might be included in the global bond indices. This could bring more bond inflows to the Indian debt market and could be a turning point for it.

What are fixed income securities?

Fixed income securities or debt securities are investments that pay out a set amount of money at regular intervals, usually known as a coupon (interest rate).
The holder of fixed income security receives this coupon payment (interest) until the security reaches maturity, at which point the investor will receive the final principal amount.
Basically, an investor is lending money to the issuer in this instrument.
The issuer can be government, banks, companies, and financial institutions, and the securities can be issued for the short, medium, or long term.  

Who should invest in fixed-income securities?

There is no one-size-fits-all answer to this question, as the decision of whether or not to invest in fixed income securities will depend on the individual investor’s financial goals and risk tolerance. 
  • Those looking to generate steady income while preserving their principal investment may want to consider investing in fixed-income securities as they tend to be less volatile than stocks. 
  • Investors who are seeking to diversify their portfolios also have to invest a sizeable portion in fixed-income securities. 

What are the advantages of investing in fixed income securities?

Some of the few advantages of investing in fixed income securities are:
1. Stability and Security – Fixed income securities are often seen as a safe investment. This is because they offer a stable return, which can help to protect the investment portfolio against market volatility. 
2. Predictability – Another advantage of investing in fixed-income securities is that investors know exactly what they are getting. This is unlike investing in stocks, which can be unpredictable.
3. Diversification – Fixed income securities can help diversify the portfolio, which can minimize the overall risk. 
4. Tax Benefits – In some cases, investors may receive tax benefits from investing in fixed-income securities.

Fixed income securities available in India

There are a variety of fixed-income securities available in India to cater to the needs of different investors. These securities are: 
1. Government Securities: These securities are considered the safest investment option as they are issued by the government. Since they are issued by the Government, they carry less risk and lower interest rates than other fixed-income securities. 
2. Corporate Bonds: These are issued by corporations and carry a higher risk than government securities. For that reason, the interest rates offered by them are usually higher than those on government securities.
3. Debt Mutual Funds: Debt mutual funds are investment funds that pool money from different investors and invest in various debt securities.  

Other Fixed income products available in India

1. Public Provident Fund (PPF): It is believed to be one of the safest fixed-income securities in India. It was introduced to provide long-term retirement planning options to individuals who are not covered by provident funds of their employers or to those who are self-employed.  
2. NSC (National Saving Certificate) & Kisan Vikas Patra (KVP): Issued by Post office for fixed intervals and sold by every post office to the general public at large to create a habit of investment from the low level of population. 
3. Fixed Deposits (FDs) by Banks and Corporates: The favorite investment options for many Indians have been fixed deposits. A fixed deposit is a very safe instrument and, as the name suggests, offers a fixed rate of return available from 7 days to 10 years from all banks, NBFCs, and HFCs.  
Are there any risks of investing in fixed-income securities?
Fixed income securities are typically seen as a less risky investment option than other securities, but there are still several risks that investors need to be aware of:
1. Interest Rate Risk: It is the risk that the return on your investment will be negatively impacted if interest rates rise during the time that you have your security invested.
2. Credit Risk: This is the risk that the issuer of the security will not be able to repay the principal and interest payments as scheduled and investors might lose their investment. 
3. Inflation Risk: This is the risk that the purchasing power of the investment will decline over time due to inflation.   
Other risks involved are reinvestment risk, liquidity risk, call risk, etc.

How to buy fixed-income securities available in India?

Investing in fixed income instruments can be a whole new experience for most investors.
FDs can be purchased from banks directly or FDs of NBFCs/HFCs from Brokers and nowadays it’s available online. Investors can open a PPF account with a bank or designated post office.
An investor can invest in bonds in the primary market (subscribing to the public issue) or secondary market (from different exchanges where they are traded). 
Investors can invest in Government securities (GOI) through RBI’s Retail Direct or from the broker. 
An investor can also invest in Government bonds through the NSE app “NSE goBID “
There are various online portals like, which will show you how to invest in bonds in simple steps.

Investors need to diversify their portfolios into a different classes of investments to reduce risk. One such way to minimize risk is by investing in fixed-income securities. Fixed income securities offer stability and predictable returns, which can be important for investors looking to protect their portfolios during times of market volatility.

There are various risks involved in fixed income securities, which an investor is advised to consider before investing. There are also multiple securities available in the market, but investors are recommended to assess their risk profile and goals before investing.

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