Plan to invest directly in bonds? Beware these risks or you could lose it all.

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₹1 lakh to ₹10,000 is a significant step towards this. While it opens up new opportunities for retail investors, it’s important to be aware of the risks before diving into bond investments, and remain vigilant once you do. Retail investors often assume that bonds are safer than equities.

While this is generally true, bonds come with their own set of risks. Kirtan A Shah, managing director at Credence Family Office, said, losses in fixed income instruments are permanent, unlike in equity, where market fluctuations offer a chance to recover. “Debt is not like equity.

if your call goes wrong, you could lose your principal," he said. The risk of losing capital is amplified when investors are lured by higher interest rates. Shah warned, “When someone is paying you higher interest, there is a higher risk that you do not understand." His advice is that unless investors have the ability to assess why a bond is offering a higher coupon, they should avoid such investments.

Also read: There’s now a faster way to resolve tax disputes. But it has a huge red flag. For retail investors, the first step to investing in bonds is understanding credit ratings.

Lower-rated bonds generally carry higher risks. Shah suggested taking advantage of the wealth of information available online to evaluate the creditworthiness of a bond issuer. It’s also crucial to assess the sector in which the bond issuer operates and scrutinise the company’s financials.