Nowadays, many people are starting to realize the importance of investing. This is caused by various factors, such as the influence of friends or social media. However, recognizing the type of investment such as Government Bonds and how to choose the right product is still necessary.
To find out about the two things above, see the full review below so that you avoid FOMO (Fear of Missing Out) and can maximize investment returns.
What are Government Bonds?
Let's discuss the definition of Bonds first. Bonds are debt securities issued by various institutions. These Bonds were also issued with the aim of obtaining sufficient funds for various purposes.
There are three types of Bonds based on the issuer, namely:
- Municipal Governments Bonds
As the name implies, this type of Bond is a Bond issued by the local government. The local government issues this letter to finance the development of the area under the authority of the government.
- Corporate Bonds
Corporate Bonds are Bonds issued by private and state-owned companies. However, it should be noted that Corporate Bonds are different from stocks in meaning.
Corporate Bonds do have a shorter maturity than other types of Bonds. However, this type of Bond is considered to have a greater risk, for example the company defaults on payments to investors. Even so, this risk is uncertain because it depends on various factors.
- Bonds from the Government
Government Bonds are debt securities issued by the central government or the state. Similar to Municipal Bonds, this type of investment instrument is also issued for development but on a national scale. Funds obtained from the Bonds will be managed by the government through the state budget.
Government Bonds are considered to have less risk because they are protected by laws and various other regulations. That is why many investors choose this type of Bond, especially novice investors.
There are various Bond products issued by the government, such as SBR (Savings Bond Ritel) and ORI (Obligasi Negara Ritel). Each type of Bond has its own characteristics. Therefore, you need a way to choose the right type like the review below.
How to Choose the Right Bond
Furthermore, it’s also important to know how to choose the right Bond product. Check out the explanation below:
- Get to Know the Bond Issuer
The first thing you need to do is regarding the Bond issuer. Above, we have reviewed briefly about Bond issuers in Indonesia. Try to find more information about the three issuers, such as history and whether they have been registered with the Financial Services Authority or not.
By getting to know the Bond issuer, you can minimize the risk of losses and default one day. You can also ensure that the publisher of the instrument is not fictitious.
If you choose Government Bonds, then you don't need to worry because there are laws that guarantee your investment. You can try to study and understand the contents of the law further so that you can be more confident in choosing it.
- Understand the Product
There are many Bond products. Even one issuer can have a variety of different products at different times. So, you need to understand the products of the issuer you will choose before starting to invest.
Government Bonds have a variety of products, for example SBR and ORI which were mentioned earlier. The difference between the two products lies in the type of coupon. SBR has a type of floating floor coupon that can change based on BI interest rates. ORI has a fixed rate coupon type.
In addition, SBR tenors are 2 and 4 years, while ORI has maturities of up to 3 years. SBR cannot be traded on the secondary market but there is an early redemption facility. On the other hand, ORI can be traded on the secondary market.
- Pay Attention to the Influencing Factors
Investing in Bonds can be influenced by various factors, such as market conditions and politics. Therefore, you need to pay attention to these factors when you want to start investing. Thus, you can adjust it to the product you will choose.
In addition, you also need to pay attention to these factors while the investment process is ongoing. So, you can estimate the profit you will gain in that time period.
If you are still unsure, you can consider Government Bonds. Indeed, there are Government Bond products that have coupons of the floating with floor type, so they can change due to certain factors.
But at least, the risk generated by these Bonds is lower than other types of Bonds.
- Plan the Strategy
Investing cannot be done without a plan to avoid losses. Therefore, learn various strategies to do it. By studying it, you can determine the steps needed, starting from choosing the type of Bond to the time to invest.
Various things that need to be considered in formulating a strategy have been mentioned previously. Analyze and make informed decisions based on these. If you are still unsure, you can ask the professionals.
- Choose Your Partner
Currently there are various institutions that can become your partner in investing. Every institution offer various things to attract investors that want to invest. However, you need to consider the selection of these partners carefully.
Choose a partner with a good reputation so that you can invest safely with a peace of mind. Apart from that, you also need to choose a partner who can support you in investing even if you are a beginner. Also consider partners who can offer more advantages and conveniences than others.
DBS Treasures as the Client’s Partner in Investment
Above you have read the explanation regarding the definition of Bonds to how to choose the right product. Regarding point number five, namely choosing an investment partner, you can choose DBS Treasures as your wealth management partner. DBS Treasures readily bring various advantages, such as:
- Obtain coupons periodically until maturity
- The coupon rate obtained is higher than Fixed Deposit rates at banks in general
- Opportunity to get potential capital gains
- Does not require other costs besides the spread, namely the difference between the selling price and the buying price of the Bond
- Easy 24 hour non-stop transactions anywhere via the digibank by DBS Application
Opportunity to be supported by curated market analysis communicated by a team of financial experts. Get the latest opportunities that have been adjusted to your risk profile and portfolio needs, driven by Artificial Intelligence/Machine Learning (AI-ML). This insight is equipped with curated solutions related to investment (Grow) and insurance (Protect), so you can quickly and confidently invest through your preferred media.
That concludes the definition and how to choose investment products, especially Government Bond products. Click here for more information about DBS Treasures.
