What are the considerations to be kept in mind while investing in debt instruments?
Before investing in debt instruments certain key considerations like the instrument’s maturity, redemption features, credit quality, interest rate, price and yield are to be taken into account. Together, these factors help determine the value of your debt investment and the degree to which it matches your financial objectives. Maturity A debt instrument’s maturity refers to the specific future date on which the investor’s principal will be repaid. Maturities generally range from one day up to 25 years. Maturity ranges are often categorized as follows: 1. Short-term notes: maturities of up to 4 years; 2. Medium-term notes/bonds: maturities of five to 12 years; 3. Long-term bonds: maturities of 12 or more years. Choice of maturity will depend on when the investor needs the principal repaid and the kind of investment return he is seeking. Some individuals might choose short-term instruments for their comparative stability and safety, although their investment returns will typically be low
