RIAs guide for Bond Investments

Why RIAs should allocate bonds in client portfolios?

RIAs (Registered Investment Advisors) play an important role for investors to achieve their financial goals. RIAs help clients in their asset allocation to optimise the return on savings given a level of risk taking ability.

Fixed income is an important part of asset allocation, as it helps balance portfolios. Within fixed income, bonds are an important asset class as it helps streamline investments to meet time bound financial objectives. For example, if an objective is to fund university costs for child/children, it is a time bound objective for maybe 5 years, and a 5 year bond along with a growth asset can help achieve the objective with a low level of risk.

Selecting suitable bonds for clients

Each client has a different risk profile and selecting bonds that suit their risk profile is important. RIAs are aware of the interest rate risk, credit risk and liquidity risk each bond carries and they also evaluate whether the bond is reasonably priced, as in the yield on the bond is commensurate to the risk of the bond.

Bond selection is then based on client requirements of yield with a given level of risk along with the corresponding bond risk. Diversifying bond investments to negate sector risk is also advisable.

Finding liquidity for the bonds

Once bonds are selected for clients, RIAs will have to source the bonds at the best price available in the market. Online bond platforms like INRBonds help RIAs to get liquidity for investors with information such as fair price, independent risk model and source the bonds for investments. There are other online platforms that offer bonds for investments.

RIAs should help their clients in buying the right bond, including the transaction process of settlement. They also help in other factors of tracking coupon flows, reinvestments, maturity and other such factors.

We would love to hear back from you. Please Click here to share your valuable feedback.