so i’ve been exploring bonds for a while now and finally signed up on bondscanner. genuinely excited to diversify beyond mutual funds.
but here’s the thing, I spoke to my CA about it and he straight up said “don’t touch anything below AA.” and i look at bondscanner and like… almost everything is A or BBB+. there’s barely any AA stuff.
so either my CA is being overly cautious or this platform is listing stuff that’s too risky for retail investors. genuinely confused rn
your CA is probably used to advising people on debt mutual funds where AA- is considered the floor for most categories. that logic doesn’t directly translate to direct bonds
ohh okay i didn’t know that distinction. so the rating standards are different?
not exactly different standards, same CRISIL/CARE/ICRA ratings. but the context matters. in a debt mutual fund, you’re holding a diversified basket, so one BBB name going wrong doesn’t wipe you out. in direct bonds, if you put 5L into one BBB+ issuer and they default, that 5L is at risk. so the caution around lower rated bonds is higher for direct investing. your CA’s concern isn’t wrong, it’s just coming from a different framework.
yeah but also AA bonds in direct markets are mostly institutional. min ticket sizes are huge or they just don’t come to retail platforms. the AA space in direct bonds isn’t really accessible the same way
wait so AA bonds exist but retail investors just can’t get them easily?
kinda yeah. or when they do come, they’re at like 7.5-8% which barely beats FD after tax lol. the whole point of going into direct bonds at the retail level is to pick up that extra yield in the A/BBB space. if u want AA just buy a debt MF honestly
I’d push back a little on “BBB is fine for retail.” It really depends on which BBB. There’s a massive difference between a BBB+ NBFC that’s been around 15 years with clean audits vs a BBB- fintech that’s 3 years old and hasn’t seen a full credit cycle. The rating is the same on paper but the underlying risk is completely different. I think the more useful framework than just the letter rating is: how old is the company, what’s securing the bond, and what does the track record look like through a stress period.
this is actually really helpful. so essentially do the homework instead of just filtering by rating letter
exactly. rating is a starting point not a conclusion
basically ur CA gave u bubble wrap advice lol. safe but it’ll suffocate u
hahaha fair enough. okay i’m going to actually read through some of the issuer threads here before making any calls. starting with the finnable one since it popped up recently
good call. the threads here are genuinely useful for that. anshul’s writeups especially.