Ankit Gupta is a Chartered Accountant with over 18+ years of experience in Financial Markets with specific focus on Bonds, Fixed Income Assets, Equity, Commodity Markets and hands-on experience in Bonds, Fixed Asset Investments, Project analysis, Financing, Private Equity and Fund Management. Mr Ankit has worked as Executive Director (MD) at A. K. Capital.
Business models have evolved with time in leaps and bounds, sometimes due to the advent of technology or because of the need to reinvent the products and adopted practices. These days it has been a norm to do everything online including your daily requirements, to invest in buying insurance or for that matter education too. In this scenario how can new-age investment products be left behind, we have seen online equity investing through apps like Zerodha angel and grow from online mutual funds to investing into cryptos through online exchanges and booking fixed deposits online, now here comes the question why should Bonds and fixed income securities be left behind. Investing has gained momentum in the last decade and has taken a big leap all thanks to covid, high disposable income, financial literacy and awareness.
Now that when bonds have started evolving as a new age investment tool in the Demat account of the retail clients we have seen a lot of online portals which have come up over the last 2 years in this space. Though the product has some features which are different from the equity platforms hence an in-depth study or understanding is required to know where are we headed in this space.
Now we have a big question as to how to evaluate these platforms and on what parameters. Let’s understand the key perspectives for choosing a platform to invest in Bonds, some of them being the safety of capital, ease of transaction, understanding of product, hassle-free process of and investment, post investing monitoring, education and information and the risk assessment about the products offered and most importantly how safe is the platform which you are using to invest. It is pretty simple confidence and trust are built over processes, policies, perspective, and pedigree. A proper evaluation of the same will tell us how safe these platforms are.
Bond Online platforms should be designed to ensure digital transactions in a secured environment. As some investors carry out the transactions on the stock exchange. Others transfer money and securities using the services of clearing corporations. Both are secure modes of transactions having no counterparty settlement risk. Investors should consider the institutional credibility of the promoter of the bond trading platform and also the critical safety features of the bond trading engine. A good way to select a platform to buy bonds is to check if the platform offers two-way prices or at least allows access to liquidity with ease in case of a need for exiting. More importantly, there should be access to quality advice concerning both market risk and credit risk for the individual investor.
Considering the parameters, let us figure out a few scenarios which can ease our understanding of the safety of these online Bonds Platforms, we are primarily concerned about three main parameters whenever we are sharing our personal details on an online trading platform,
- Authenticity of KYC completion – Our KYC should not be accessible to anyone else and its privacy should be well intact, the process should be online barring the troublesome manual KYC completion, so that it may ease the burden from the investor’s head. Few Websites are still not offering fully enabled online completion of KYC, although one of the websites provides full-fledged KYC completion online.
- Investment Settlement Mechanism- The other thing to be monitored is whether the trading platform is dealing with direct payments or it is dealing via exchange for the payments because ultimately if the Online platforms are holding the money with them then there is always a risk of insolvency, bankruptcy, or forgery whereas if the Government exchange is involved in the mechanism, then the investors’ money is directly deposited with the exchange, therefore they cannot play fraud with the investors’ money in any case. Look for the platform that promotes transparent transaction, and deals in RBI/SEBI approved settlement mechanism.
- Quality of Bonds offered – It is very important to know about the quality of product portfolio on online platforms, although there are credit rating agencies, which provide you the ratings of the Bonds, still, there are various trading platforms that are dealing with the Bonds from the companies, which are having negligible public data, their financials are unknown, and they don’t have a long-standing pedigree. So, they are not promoting trustworthy products to their investors, whereas established players are carefully taking care of highly rated bonds and products from publicly known brands.
As RBI and the Government of India wish to democratize the bond market for small investors to invest in easy clicks, mapping all the parameters, there is one market player which has fulfilled all the parameters with shining colors so far, i.e., BondsIndia.com which is the only platform providing a Document-less KYC, i.e., a complete online solution to your worries, it is not having the counterparty settlement risk as it is dealing with the exchange for complete payments, i.e., it is the only platform providing the real-time settlement, and thirdly it is only dealing with the Bonds which are having long-standing pedigree and are publicly available with all types of company financials data, their technology-driven edge has proven to be most effective in breaking complex 4-6 days trading procedure to a simple 3 step process- Online KYC, Selection of Bonds and Making Investments, although as every basket is not full of fresh fruits, there is still scope of improvements with them too, as they are not supporting UPI payment settlement below Rs. 2 lakh, since RBI is not allowing the same.
Being an online trader, one should always have hope- where there is a will, there is a way! Therefore, New Age Bond Online Platforms are safe enough for investing, maintaining, and rebalancing your portfolio with the ease of a click. Yet, as per Jeff Cooper, “The essential thing is to bear always in mind that trouble can appear at any time. Be Aware, Be Ready and Be Alert”.