Government Bonds is a popular choice nowadays for investors. It has gained the attention of a myriad of people and ages. From millennials to baby boomers.
Although there are many investment options to choose based on the risk profile of investor, Surat Berharga Negara (SBN) remains a recommended one. Then, why Government bond (SBN) be one of the right investment choices?
As a profitable investment instrument, SBN is not only able to provide benefits to the state. But also for investors. Investing in SBN, in fact also has a compounding effect. For more details, consider the following information about the compounding effect.
The Compounding Effect in Investing Government Bonds
The term compounding effect refers to something that is quite important for investors to understand. The reason is, this can help investors in developing their investment funds faster for the long term.
The term compounding itself is a strategy or system of interest-bearing interest. In general, the notion of compounding is the ability to generate profits through previously earned profits. In short, the compounding effect is reinvesting income generated from a previously invested asset in order to provide a greater potential for profits. This is also called "revolving interest" or "interest bearing interest".
In this case, it can be concluded that the meaning of compounding effect is the addition of profit value from the income that is re-invested by investors. Even this profit will continue until the potential for investment profit is maximized.
This is the Compounding Effect of Investing in Government Bonds / SBN
Government Bonds or Surat Berharga Negara (SBN) is an acknowledgment of debt that is guaranteed by the Republic of Indonesia for payment of interest and principal value according to the validity period. Surat Berharga Negara (SBN) has various series, including: such as Sukuk Tabungan (ST), Saving Bond Ritel (SBR), Sukuk Ritel (SR), and Obligasi Negara Ritel (ORI). Each series issued has its own objectives and functions related to the development of the country.
Government Bond are also a safe investment option. This is because the payment of the return and the principal of the investment is guaranteed by law. The first, namely UU No.19 Tahun 2008 tentang Surat Berharga Syariah Negara and secondly, UU No.24 Tahun 2002 perihal Surat Utang Negara.
By purchasing SBN instruments, investors play an active role in supporting the country's development. As an investor, will participate in efforts to reduce dependency on foreign investors. Also, the coupons and tenors offered are also vary.
The retail offering of Government Securities (SBN) is open in various series throughout the year. This makes SBN investments able to generate profits from the compounding effect which is also often referred to as the “interest bearing” effect.
Which means, the interest that investors get from investing in Government Securities can be reinvested in the same instrument or in different products. The goal, of course, is that the interest that has been generated can be reinvested in order to get interest from the previous returns.
Thus, investors can earn new profits only from interest generated. Investors are targeting a compounding effect.
Especially for investors who intend to make long-term investments in Government Securities. How come? This is because, investing with the compounding method is predicted to give a huge potential benefits if investors investing as early as possible.
The main benefit of compounding investing is that it is effective in achieving financial goals. This compounding effect can be exemplified as follows. For example, your internet subscription fee per month is Rp. 250 thousand. So that the subscription fee in one year is Rp. 3 million. If only you invest this funds within 1 year, you will potentially earn profits. Let's say that the profit is 15% or the nominal is equivalent to Rp450.000. This profit is reinvested and the capital is increased to Rp3,45 Mio. One year later, the profit that you invested will potentially grow into Rp517.500, a 15% increase. This is the simulation of compounding effect.
Of course, this figure will continue to accumulate along with the addition of assets or profits that you invest.
You don't have to worry about starting to invest in SBN. The most important aspect in the compounding effect is not in terms of nominal value, but also the time to invest. Where the earlier you invest and reinvest the profits, the greater the compounding effect you will get.
In conclusion, the compound effect is a viable investment strategy that can grow your potential returns. It is recommended to take it easy and take your time on siding some spare funds every month to invest. Considering the compounding effect, prioritize time more than money.
As such, consider investing early in Government Bonds with DBS Treasures to gain the compounding effect that you want.
Government Bond Investment Recommendations with DBS Treasures
DBS Treasures priority banking is here for those of you who want to invest with Government Bonds and enjoy exclusive privileges. Among them is the ease of planning and obtaining wealth management solutions from strategic experts.
Personally designed for each customer with the support of various Wealth Specialists in their fields. Such as Treasury Specialist, Investment Specialist, Insurance Specialist, and Home Loan Specialist.
But that's not all. There are many other benefits of investing Government Bonds in DBS Treasures such as follows:
1. Potential Capital Gain
Investing in several types of Bond instruments, then the assets can be resold at any time before maturity. By investing in this instrument, you can get potential profits from the results of rising bond prices.
2. Issued by the Government
Investments in Government Bonds in DBS Treasures are safe because they are issued directly by the government and are guaranteed by law.
3. Various Options for You
A wide selection of investment products for your desired time and currency ( IDR and USD), according to your personal preferences.
4. Earn Coupons
During the investment period, you can earn regular income in the form of coupons that will be paid periodically by the issuer of the Bonds.
5. Transactions Anytime Anywhere
Investors can transact anytime 24/7 for various Bond products with ease through the digibank Application by DBS.
6. Competitive Coupon
Bond Investment is able to provide a competitive coupon rate above the average time deposit.
7. No Additional Fees
Invest without the hassle of additional cost (Only a spread or selling price and buying price difference of the asset).
Knowing the benefits of investing in DBS Treasures. Start investing your assets now. Here’s how:
- In the digibank Application by DBS, create your Single Investor Identity (SID) if you haven’t had one yet.
- Choose your Bond product to invest in Primary Market Bonds (if in the offering period) or Secondary Market Bonds.
- Determine the investment denomination, namely using IDR or USD.
- Next, you need to select a product based on your risk profile, coupon or expected return, until maturity.
Isn't it really easy to start investing with DBS Treasures? Entrusting Government Bond investment in DBS Treasures is clearly safe because DBS Indonesia Bank has permission and supervision from the Financial Services Authority (OJK).
You can enjoy financial peace by investing in Government Bonds. Become a priority banking customer and start investing in Government Bonds with confidence with DBS Treasures.
