All You Must Know About
The Fixed Rate Bonds
Government bonds and savings schemes are witnessing a series of cuts over the past few years. It seems that the government is least bothered in continuing these bonds and investment generally. The interest rates offered to the customers on the savings were already too small to be attractive and with the changes in the interest rates they have become all the more unattractive.
However, in the current scenario where the world is reeling under economic crisis, financial institutions and banks are shutting or trimming their business; one can easily find people who have lost their life’s savings in the investment options where they were directly exposed to the market. People who were more concerned about their investments and were looking for savings rather than earning profits on them, preferred to stay with the low earning bonds. However, these people still had their investments left with them even in these worst circumstances.
Let us understand the details of these bonds and the savings instruments:
Governments are responsible for the building of the nation. There are several projects related to safety, communication, transport, power, railways, business, land development and similar ones which require funds to complete. The government earns the money from the taxes we pay for them and channelizes the same to these projects of importance. However, money received from taxes is insufficient to fund the projects. Thus, government borrows fund of the people by means of financial instruments often referred to as bonds or fixed rate bonds under which the money is utilized to fund these important projects and the lenders to the government are offered an interest on the funds they offer. Government funds are often for a fixed period of time and earn fixed interest too.
If you are financially sound and have enough funds which you can keep aside for a few years, it is better to invest them into the fixed rate bonds as these offers guaranteed return on the investments. These can be used for specific purposes over a period of time.
In order to understand the fixed rate bonds better here are a few details:
- The fixed rate offers the much needed guarantee that the funds will be safe and will offer a fixed return no matter what the situation is. These investment options really look great in the current scenario where the best of the financial institutions and banks are finding it tough to sustain their operations.
- Bonds offer better interest as compared to the savings accounts.
- These are apt for the investors or people who are in the habit of spending unnecessarily as the money in the bonds gets locked for a specified period.
- The period for the lock-in of the funds in the bonds ranges from 6moths to 5years.
- One cannot withdraw funds from the bonds prior to their maturity period.
- Fixed rate interest provides a clear estimate of the money one will receive at the time of maturity, and hence can plan their expenses accordingly.
- Low risk investment option as they are, offer fixed interest but save one from the fear of losing their hard earned money.
It all depends on the individuals for the kind of investment generally they are looking for and the kind of plans they have with the money. However, an investment portfolio is said to be incomplete if it does not have these bonds within them.
The group at savingsaccounttips.info owes the responsibility to spread awareness about the savings accounts available and how to maximize your benefits from them. We strive to provide you all the details relevant to the savings accounts as understanding of the savings accounts help you make informed decisions with regards to your hard earned money.