Should You Buy Corporate Bonds?

Dear Reader,

Benny, a former business journalist, knew very little about corporate bonds when he started investing in them about a year ago.

“I knew about government bonds, which weren’t yielding much. But when I came across corporate bonds, I thought about investing in them. As a diversification thing,” he told me.

Benny is like many Indian retail investors who are now turning to corporate bonds.

Industry estimates say that retail investors now put about Rs 1,500-2,000 crore a month into corporate bonds, up from about Rs 300 crore a month a year earlier.

Bonds can look like a sweet spot: you don't have to deal with the daily ups and downs of the stock market, and the returns can be higher than what you'd get from a fixed deposit.

But investing in bonds isn't always easy.

The yield on a bond matters. But so do things like credit ratings, tenor and liquidity, said Nishchay Nath, founder of online bond aggregator platform Bondscanner.

And these aren't just theoretical risks.

In 2020, Franklin Templeton wound up six of its debt schemes after severe market illiquidity and rising redemptions left the schemes unable to generate enough liquidity to meet redemption demands.

It was a reminder that even when investments haven't all defaulted, investors can still have trouble getting their money out when they need it.

So liquidity is crucial.

Then there's another question: where do you buy the bond?

Should you just pick the first AAA-rated bond you see on the first platform you open?

Suresh Darak, founder of Fixed Alpha, a site that lets investors compare bonds listed on the NSE and BSE, says no.

“Different platforms sometimes offer bonds at different prices, so investors should compare platforms before investing,” Suresh told me.

So as corporate bonds become easier for ordinary investors to access, do investors really understand the risks they're taking?

To find out, tune in to the latest episode of The Signal Brief, where we speak to retail investors and experts about India's growing bond boom.

You can find The Signal Brief on YouTube, Spotify, and Apple Podcasts.

Thank you once again for listening and supporting us. We’d love to hear from you; write to us at [email protected] or find us on Instagram or X at @thesignaldotco.

Best,
Kudrat
on behalf of The Core

THE CORE POLL RESULTS

Last week, we asked if you’d ever overpaid for a flight. Here’s what you said:

MESSAGE FROM OUR SPONSORS

Stop feeding the feed.

You’ve put in the work to build an audience. But when the only way to reach your fans is through a social feed determined by algorithms, the platform decides who sees what you make next.

beehiiv gives you the tools to reach your audience directly. On their all-in-one platform, you can turn followers into subscribers, grow your newsletter, and connect it all to your community or podcast. Stop chasing virality on platforms you can’t control. Build a stronger, more sustainable business on beehiiv.

Get started for free.

🤝 Reach 80k+ CXOs? Partner with us.

✉️ Got questions or feedback? Reach out.

💰 Like The Core? Support us.