Tuesday, April 6, 2010

Govt. Bonds is safest way on investment

Govt. security or treasury bonds, now a day gives a good return and it’s also a safe investment, there is not a issue to loss capital due to adverse condition.

Future for the treasure bonds also goods as interest rate reduce day by day and there is not any symptom in the market that Govt. increase the interest rate in the near future, In that market scenario, the bank deposit reduce and money comes in market and the increased money flow in the market increase the inflation situation and also affect the purchasing power of the currency.

Govt. issues this security bonds in the market not only to reduce inflation pressure but also to meet the fiscal deficit.

Now the question arises what is the fiscal deficit?

Govt. makes different development plans and also invests in defense and other research programme, there is no other option to reduce investment or neglect any one of this sector, but the actual investment in these means most of times more than the revenue generate by the govt.

To meet this extra expenditure Govt. need to take loans from the world monetary funds or raise money from internal sources.

Loan taken from world financial institution not good from any respect because some time world bank of International Monetary Funds impose different terms and condition on the country to use such fund on a related field also these institution demand to concentrate on specific field of economy and they also want the total detail of the use of that funds which is never appreciate because it disclose many financial plan of the economy which need to kept secret for the development, or economic growth.

Than there is only one way to raise money by the issue of the Govt. security.

Budget deficit of US govt. in 2010 is$1.57 trillion and in 2011 it will be$ 1.267 trillion.

Advantage of the Govt. Bonds:

1. Safe means of investment: Govt. bonds are the safe means of investment. Govt. bonds market value not change as like other investment avenue, it is the safest way of investment.

2. Liquid cash transfer: Govt. bonds easily transfer into liquid cash as per requirement, by mortgage it to any bank or to sell in the open market.

3. High interest rate: Govt. bonds interest rate not change with the change in market situation that means if you invest in one interest rate till the maturity you got the same interest rate benefits. Interest rate in the Govt. bonds higher that the bank deposit or other investment plan.

4.Capital gain : Govt. bonds market value not reduce as like any other means of investment .Investor always get better return after maturity of the bonds.

5. No need to maintain Portfolio investment: Govt. bonds are most safe way of investment, you don’t need to invest in different means of investment or maintain the portfolio management to minimize the risk of investment.

6. Good future prospect: As per the economic situation the market demand for the govt. bonds increase, as the reducing rate of interest and development of infrastructure Govt. need huge investment in future which means Govt. collect that money from issue of the bonds.

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