It’s always easy to buy a bond. A bond can ‘promise’ regular income but a well-built bond portfolio is a different ball game. It must be able to withstand a default, changing interest rates, and shifting economic conditions. A good portfolio ensures a single issuer’s default does not wipe out a large chunk of your investment.
The starting point is simple: ask yourself when and how much money you need, whether you want periodic interest or capital appreciation and how much risk you are willing to take: risk tolerance. The answers to these questions will decide the bonds you choose, the lock-in period and if at all you need bonds in the first place.
The spread
Don’t let the bond portfolio turn a collection of similar bets. Mix Central and State government securities, Treasury bonds, corporate bonds and bank bonds, and spread the money across issuers, sectors and banks. Government debt can anchor the relatively safer end of the portfolio, while corporate bonds may offer higher yields with a mix of risk and return rather than depend on a single issuer.
Perpetual bonds
