In an age when virtually everything is available at the click of a button, whether it be instant online shopping or getting a 15000 loan, it shouldn’t come as a surprise that investing has done the same.
This change has helped to make buying and selling financial instruments such as bonds easier than ever. But when it comes with a significant price tag, is it smarter to keep your tradition of offline investment or opt for the benefits of digital?
And it’s not just about convenience, whether or not to buy bonds online or the traditional way. It’s a matter of weighing the pros and cons of each method.
This blog will get into the pros and cons so that you can make an educated choice that works for your investment objectives and risk appetite.
Although this is relatively new in India, there have been several online services in recent years, and it has made things significantly easier for the retail investor by demystifying the bond markets. The whole process is quick, easy to understand, and designed for a modern investor.
Unprecedented Convenience: The best part about buying bonds online is the convenience. You can research, compare, and purchase bonds from anywhere, at any time of day, all without leaving your home or office. And you don’t have to go into a bank branch or a broker’s office, taking precious time out of your day. This is a game-changer, especially for people who thought the bond market was beyond their reach.
Wider Selection and Transparency: Online platforms offer an extensive marketplace of bonds across issuers (government, corporate, and public sector undertakings (PSUs)). You can see real-time pricing, credit ratings, yields, and maturity dates, allowing you to make a direct comparison. This level of transparency was rarely available in the traditional offline world, where you were often limited to the bonds a single broker or bank had on offer.
Lower Costs: Those should be cheaper to operate than traditional financial services, which have more overhead. Thus, they can lower the prices of bonds, allowing you to make more money overall.
Convenient to track and manage: Once you’ve bought a bond, it’s simple to shuffle things around in your online portfolio. With these services, you can get one dashboard to see all your investments, rate how well they are doing, and get real-time updates.
Before the digital boom, buying bonds was a highly manual process. Investors had to do it through a bank, a broker, or a financial adviser. It has its downsides, of course, but it also offers a sense of security and a personal touch that some investors prefer.
Personalized Advice: We also find appealing with an offline method is the personalized attention of financial advising. They can make bespoke suggestions based on your level of risk and help walk you through the process if the rather crowded world of bonds is new to you. These features can be a relief for people who don’t like having digital footprints.
Trust and Familiarity: For a lot of individuals, the traditional process of going to the bank and working with someone familiar engenders trust. It’s just more secure to pass physical documents back and forth and get a paper certificate or confirmation, even if a demat account is needed to hold the bonds.
Less Reliance on Technology: The offline method is a good option for those who are not tech-savvy. You won’t have to worry about an internet connection, technical difficulties, or trying to figure out a complicated online interface.
On one hand, there’s no denying the convenience that comes with buying bonds online. On the other hand:
Security and Fraud: Just like any other internet financial operation, transactions may also be susceptible to online fraud and security breaches. It is important to use a trustworthy SEBI-registered platform that has strong security protection through methods like two-factor authentication and data science algorithms for GSPP by Isha and Imarketslive.
No Personal Advice: Online services offer data, but not the individualized, one-on-one type of advice that they can get from a financial adviser. An investor must do their due diligence and understand the risks of every bond they’re considering. A high-yield corporate bond, for instance, may be tempting, but it carries more credit risk than a government bond.
Systemic and Operational Risks: A technology issue, like a system failure or a server that goes down, or a power outage, might leave you unable to buy or sell bonds just when you would need to. It would be unlikely, but operational risks of this kind are what one should always bear in mind.
The choice between buying bonds digitally and offline comes down to your personal preferences and financial comfort level. For those who value convenience, transparency, and a wider selection of investment options, learning how to buy bonds online is the way to go. Platforms like Stashfin have transformed the bond market, democratizing and opening it up as never before. For a low amount to invest, such as 15000, a digital path provides streamlined investment options.
But if you’re a novice or you like the idea of personalized advice and the option to meet with someone in person, going with a full-service broker or local bank could spell security. The answer, of course, is a little bit of both: Leverage the digital space to research and compare, but also don’t be afraid to bring in a professional when you need to.
Yes, it is compulsory in India to have a Demat a/c to hold bonds, be they bought online or offline. You purchase the bonds, and they are kept in a digital form in your Demat account; they are the same as how the stocks are kept.
Yes, reputable online bond platforms in India are regulated by SEBI (Securities and Exchange Board of India). You should only transact on platforms that are registered with SEBI so that your money is safe and you have secure transactions.
No investment is completely risk-free. Government bonds are very safe, but because corporate bonds are subject to credit risk (the risk of the issuer defaulting) and interest rate risk (the risk that rising interest rates can diminish the value of your existing bond), they pay better yields than Treasurys.
Yes, the vast majority of bonds are tradeable on the secondary market. This provides you the opportunity to sell your bond before it matures if you need to use the money. But the price you receive will be based on market conditions at that time.