How can I purchase corporate bonds using the RFQ platform?

 How can I purchase corporate bonds using the RFQ platform?

I'm a retired professor of government who is 65 years old. Prior to retiring, I invested in mutual funds and NPS. I have fully ceased investing in mutual funds since I retired. My whole retirement fund is now placed in fixed deposits and specific retirement savings accounts. I now want to diversify my investments by purchasing corporate bonds as well. I don't know anything about corporate bonds, however. I just learned that SEBI's RFQ platform allows small investors to purchase corporate bonds. Could you please explain the benefits and drawbacks of investing in corporate bonds? Separately, could you kindly explain what the SEBI RFQ platform is? 

The get for Quote (RFQ) platform, which SEBI created in 2020, gives investors a transparent and effective way to trade corporate bonds by allowing them to get prices from numerous dealers and choose the most advantageous one.

In 2020 Q, Sebi unveiled the RFQ platform. I am a retired professor of government who is 65 years old. Prior to retiring, I invested in mutual funds and NPS. I have fully ceased investing in mutual funds since I retired. My whole retirement fund is now placed in fixed deposits and specific retirement savings accounts. I now want to diversify my investments by purchasing corporate bonds as well. I don't know anything about corporate bonds, however. I just learned that SEBI's RFQ platform allows small investors to purchase corporate bonds. Could you please explain the benefits and drawbacks of investing in corporate bonds? Separately, could you kindly explain what the SEBI RFQ platform is? 

Salem, Tamil Nadu's Vidyanathan K. T.

The Request for Quote (RFQ) platform was introduced by the Securities and Exchange Board of India (SEBI) in 2020 to provide investors a clear and effective method to trade corporate bonds. Investors may seek prices for a certain bond from many dealers using the RFQ platform, then choose the best offer.

advantages of corporate bond investment in India

Income that is consistent: Semi-annually or yearly, corporate bonds often pay a set interest rate at predetermined times. This may provide investors a reliable source of income.

Corporate bonds may be used to diversify a portfolio of investments. By doing so, risk may be decreased and total returns can be raised.

Potential for capital growth: Just like the stock market, the price of corporate bonds may change over time. The whole face value of the bond, together with any accumulated interest, will be paid to the investor if they retain the bond until it matures. If the company's credit rating rises over time, this may result in capital appreciation.

Liquidity: Compared to other fixed-income instruments like government bonds or certificates of deposit, corporate bonds are often more liquid. As a result, bondholders often have rapid and simple access to selling their bonds when necessary.

Cons of holding Indian corporate bonds

Credit danger The danger that the issuer of a corporate bond would stop making payments on their debt is known as credit risk. By purchasing bonds issued by organizations with excellent credit ratings, this risk may be reduced.

Risk associated with interest rates: Variations in interest rates may have an impact on the cost of corporate bonds. Existing bond prices often decline when interest rates increase. This is so that investors may purchase new bonds with greater interest rates, which reduces the appeal of current bonds.

Volatility: Just like the stock market, the price of corporate bonds may change over time. This implies that if investors sell their bonds at a low price, they risk losing money.

In general, corporate bonds may be a solid investment for those seeking consistent returns, diversity, and the possibility of capital growth. Before investing in corporate bonds, it's crucial to understand the dangers associated.

Checklist for investments

Do your homework: Before purchasing bonds from a firm, it is crucial to investigate it. Take into account the firm's financial stability, credit standing, and market prospects.

Invest for the long run: Long-term investors are often best suited for corporate bonds. This is due to the fact that although bond prices might change in the short term, they typically follow their underlying interest rates over the long run. Make sure your investments are spread out; avoid putting all your eggs in one basket. Invest in a range of corporate bonds, as well as other asset classes like stocks and real estate, to diversify your portfolio.

How can I use the RFQ platform to buy in corporate bonds?

Investors must create a trading account with a broker that provides access to the RFQ platform in order to trade in corporate bonds using the platform. After creating an account, customers may sign in and begin trading.

Investors must submit an RFQ for the desired bond in order to trade in corporate bonds. The amount of bonds the investor is interested in purchasing as well as the price they are prepared to pay should be included in the RFQ. Following the submission of the RFQ, the investor will get prices from many dealers. After comparing the quotations, the investor may choose the best deal.

Benefits of utilizing the RFQ platform to buy in corporate bonds

Using the RFQ platform to purchase corporate bonds has a number of advantages, such as:

Lower investment threshold: The RFQ platform just requires a minimum investment of 10,000. This opens up corporate bonds, which were previously solely available to big investors, to small investors.

Better transparency: Using the RFQ platform, investors may evaluate prices from many dealers in real-time and choose the best offer. This helps in ensuring that bondholders are paying a fair price for their securities.

Reduced transaction costs: Trading corporate bonds on the RFQ platform is affordable since it has a minimal brokerage fee.

Convenience: Through their online trading account, investors may utilize the RFQ platform. This makes trading corporate bonds without going via a broker simple.

In conclusion, the RFQ platform developed by SEBI has made it simpler for novice investors to purchase corporate bonds. Numerous advantages are provided by the platform, such as a lower investment barrier, more transparency, cheaper transaction costs, and ease. The RFQ platform should be taken into consideration by small investors that are interested in purchasing corporate bonds. It is a secure and effective method to buy and sell corporate bonds at the lowest price.