Bonds are finally within reach. But do you know what you’re buying?

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For most of the last decade, a bond in India was something investors heard about but rarely owned. The minimum ticket was ₹ 10 lakh, then ₹ 1 lakh—numbers that quietly told the average retail investor that this market was not built for them.

That has changed. The Securities and Exchange Board of India (Sebi) has lowered the minimum face value of privately placed debt securities to ₹ 10,000, while online bond platforms now put hundreds of issuances within a few clicks. For the first time, a schoolteacher in Indore and a fund manager in Mumbai can access the same bond.

But access is not the same as understanding. When yield is the first, and often the only, number an investor sees, it is easy to treat a bond like a fixed deposit with a better rate. In reality, a bond is a loan an investor makes to a specific borrower, on specific terms and for a specific period.

Every bond has a date on which the borrower promises to return the principal. That date matters for two reasons. First, it should match the investor’s goal: money needed in three years does not belong in a 10-year bond.

Second, maturity determines how sensitive a bond is to changes in interest rates. Longer-dated bonds tend to move more when rates change: a rate cut lifts their price, while a rate hike pulls it down.

For investors who hold a bond to maturity, those price swings matter less.

The coupon is the interest paid by the bond, often twice a year. It is usually fixed when the bond is issued and provides a predictable income stream in a portfolio full of moving parts.

But the coupon is not the same as the yield. Yield reflects the price an investor actually pays for the bond. Buy a bond below its face value, and the yield can be higher than its coupon.

This is what separates a bond from a bank deposit. A deposit is backed by insurance up to a limit; a corporate bond depends on the issuer’s ability to pay.

Credit ratings, ranging from AAA to below investment grade, are agencies’ assessments of that ability. They are useful, but they are opinions, not guarantees, and they can change.

The rule worth internalizing is that yield is the market’s price for risk. When a bond offers three or four percentage points more than a government security of the same tenure, that gap is not a gift. It is compensation for a risk someone has decided is real.

In theory, investors can sell a bond on any day the market is open. In practice, India’s secondary bond market is thin, with only a small fraction of outstanding bonds changing hands on a given day. Trading is concentrated in the highest-rated names.

For a lower-rated or less-known issuer, investors may find few buyers—or buyers willing to take the bond off their hands only at a discount. This is why seasoned bond investors buy with the intention of holding to maturity and treat the ability to exit early as a bonus, not a plan.