One bond is good. A mix of bonds is better

Spreading your investments across different bond types can help balance risk and returns.

When you invest in a bond, you lend money to a government, public-sector undertaking or company for a specified period, in return for interest. But not all bonds are alike: they differ in terms of issuer, tenure, credit quality, risk and potential yield. Credit ratings such as AAA, AA, A and BBB help indicate an issuer’s relative ability to meet its repayment obligations, although they do not eliminate investment risk.

A diversified bond portfolio can balance varying levels of risk, safety and potential yield. Here’s how different bonds may work together.

This is why bond investing need not mean choosing just one bond. Investors can build a mix across different issuers, maturities and credit ratings based on their risk appetite and financial goals. Read the infographic to understand how such a diversified bond portfolio may be structured, and how its different components can contribute varying levels of relative safety, risk and potential yield.

From G-secs to corporate bonds, understand how issuer type, credit rating and tenure can shape the risk profile of a bond portfolio.

To explore more insights on bonds and diversification, click here.

Note to the Reader: This article has been produced on behalf of the brand by HT Brand Studio and does not have journalistic/editorial involvement of Hindustan Times.