1. Unlike regular bonds that pay a fixed rate of interest, floating rate bonds have a variable rate of interest.

2. The rate of interest of a floating rate bond is linked to a benchmark rate and is reset at a regular interval.

3. Interest rate risk is largely mitigated as these bonds will pay higher return when prevailing rates are high.

4. There is no certainty of the future stream of income when investing in a floating rate bond.

5. The best time to buy floating rate bonds is when rates are low and are expected to rise.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)