When I sit down with an investor to discuss fixed income, I often hear a familiar line: “I like bonds, but I don’t really know what I’m choosing.” I understand that. The bond market can look neat on the surface—interest, maturity, repayment—but once you start exploring, you realise there are many types of bonds, each built for a different purpose and carrying a different set of trade-offs. My goal here is to make those differences feel clear and usable, not theoretical.

At the simplest level, a bond is a loan. You lend money to an issuer, and in return you receive interest (or a defined payoff) and your principal back at maturity. The details—who the issuer is, how interest is paid, what happens in stress situations, and how easily you can exit—are what separates one bond from another.

Government bonds: stability with rate sensitivity

Government securities are often the first stop for conservative investors. These include Government of India dated securities (G-Secs), Treasury Bills, and State Development Loans. I see them as “clean” instruments because the main worry is not usually default; it is interest rate risk. If interest rates rise after you buy a long-term government bond, its market price can fall. So, even in the safest category, I still respect maturity and duration.

Corporate bonds: yield comes with homework

Corporate bonds are issued by companies to fund growth, refinance debt, or meet working-capital needs. They generally offer higher yields than government bonds, and that extra yield is the market’s way of pricing additional risk—credit risk, liquidity risk, and sometimes complexity in structure.

When I evaluate corporate debt, I look at more than the coupon. I check the credit rating, yes—but I also look for business stability, cash-flow visibility, and whether the bond is secured. A secured bond may have a claim on specific assets; an unsecured bond relies more heavily on overall issuer strength. The distinction matters when markets get uneasy.

Bonds from banks and NBFCs: structure matters

Banks and NBFCs frequently raise money through bonds. Some instruments are senior (higher priority for repayment), while others are subordinated (lower priority). I treat this as a practical issue, not a technical footnote. Subordinated bonds may offer better yields, but the repayment hierarchy changes the risk profile. In fixed income, order of repayment is not a detail—it is part of the product.

Purpose-driven bonds: tax and savings angles

Certain bonds exist because investors need solutions, not just returns—tax planning, capital gains reinvestment, or long-term savings alignment. Depending on prevailing rules, some categories can be tax-beneficial. I prefer using these instruments with intent: if the goal is clear, the product choice becomes clearer too. If the goal is unclear, even a “good” bond can become the wrong decision.

Zero coupon and floating-rate bonds: different ways to receive value

Zero coupon bonds do not pay periodic interest. Instead, they are issued at a discount and redeemed at face value. I find them useful when I want a known maturity value without reinvestment decisions along the way. Floating-rate bonds reset their interest periodically using a reference rate. These can reduce the pain of rising rates, but I still read the reset formula and spread carefully, because “floating” does not automatically mean “low risk.”

How I choose between them

My personal checklist is consistent: time horizon first, then credit quality, then liquidity needs. After that, I look at interest rate sensitivity—longer maturities usually mean bigger price movement when rates change. I also avoid concentration. In bonds, diversification is not just good practice; it is a form of risk control.

Access and execution today

For many investors, it is now practical to buy bonds online, compare available options, and review key terms before investing. Convenience, however, should not replace diligence. Even when the process is digital, I still want to understand what I own, why I own it, and how it behaves if markets move against expectations.

If you remember one thing, let it be this: the “best” bond is the one that matches your goal, your time frame, and your risk tolerance—because that is how fixed income delivers confidence, not just yield.