Government bonds are a type of investment where you loan money to a government entity. In exchange for lending the money, the government entity agrees to pay you interest and return your original investment, called the principal, later. There are many different types of government bonds, and each has its risk level and yield potential. For example, Treasury bonds are considered some of the safest investments because they are backed by the full faith and credit of the Indian government. However, because they are considered safe investments, they also tend to have lower returns than other types of government bonds. Municipal bonds are another type of government bond that can offer investors safety and stability, as they are typically backed by the revenue from a specific project or tax revenue from a city or state. However, because municipal bonds are payable only from the revenue generated by that project or tax revenue stream, they may be riskier than Treasury bonds. Government bonds can be an excellent addition to any portfolio, but it’s essential to understand each type’s risks and potential returns before investing.