How can someone build a steady stream of extra money without relying solely on their main job? The answer often lies in choosing the right investment mix, and bonds might just be the secret weapon many people overlook.
When comparing investment options for secondary income, bonds offer a compelling middle ground between safety and returns. Unlike fixed deposits that typically max out at seven to ten years, bonds can lock in attractive rates for decades. Some even stretch to 100 years, though that might feel like planning for your great-grandchildren’s retirement party. Institutional investors often use ultra-low latency connections to execute bond trades quickly, which highlights the efficiency bonds can offer in large portfolios.
Bonds lock in decades of attractive rates while fixed deposits tap out at seven to ten years maximum.
Bonds provide regular, predictable payments through contractual obligations that issuers must honor regardless of their performance. This creates a reliable income stream that many investors crave. The interest rates on bonds generally beat fixed deposits, giving savers more bang for their buck.
Plus, bonds offer flexible payment schedules including half-yearly, annual, or cumulative options at maturity.
Stocks certainly bring excitement with their historical average of 10 percent annual returns over the past century. However, this comes with significant volatility that can make even seasoned investors lose sleep. While stocks represent company ownership and potential profit sharing, they also expose investors to complete principal loss and market fluctuations beyond anyone’s control.
Fixed deposits shine in their simplicity and safety, making them perfect for risk-averse investors. They offer special rates for senior citizens and tax-saving options up to ₹1.5 lakh annually. Small investment amounts make them accessible to nearly everyone, though early withdrawal penalties can sting. Banks and NBFCs typically offer these instruments with assured returns that appeal to conservative investors seeking guaranteed outcomes.
From a tax perspective, bonds present interesting advantages. Long-term capital gains face just 12.5 percent taxation after twelve months, while short-term gains get hit with 20 percent. Some bonds even offer tax-free interest depending on the issuer. Many bonds provide additional security through asset-backed structures, offering extra protection beyond the issuer’s creditworthiness.
Liquidity sets bonds apart from fixed deposits. Bonds trade in secondary markets without standard penalties, while fixed deposits typically punish early withdrawals. This flexibility allows investors to capitalize on changing interest rates and market conditions.
For reliable secondary income, bonds often outperform both stocks and fixed deposits by balancing steady returns with reasonable liquidity and tax efficiency.
