Before choosing an investment instrument, a number of things must be prepared. Including when you decide to invest in Government Bonds. By applying these investment tips, you can also gain maximum profit when investing.
To understand more about important tips when investing in Bond instruments, please read through the comprehensive explanation below.
8 Things to Prepare Before Investing in Bonds
Before deciding to jump into Bond instruments, consider the following important tips to gain optimal profits.
- Investment Objectives
When you want to invest, determine your investment goals first. Basically, everyone has different goals, so the type of suitable investment instrument will be different. There are those who want to invest long-term, there are also those who have short-term investment goals.
- Risk Profile
The next important tip is to understand your risk profile. Whether you are an aggressive or moderate type of investor. If you are a risk taker, there is nothing wrong with investing in Equity Mutual Funds.
However, if you are still unsure about allocating your funds for investment, choose a low-risk type of investment instrument such as Bonds. Government Bonds are considered safe investment products because they have low risk amid unstable market conditions.
- Type of Assets
You must also understand the types of assets that will be used. When selecting Bonds or Money Market Mutual Funds instruments, the assets used are debt securities. This is important to understand so that you also know the source of the returns you gain when investing.
- Source of Income
Then, you must also consider the source of income from the selected investment instrument. Bonds will offer regular coupons or fixed income from debt securities issued by the issuer. Bond investors will also gain back their principal capital on the maturity date.
- Features Offered
Each investment instrument will generally offer different features. When you want to invest, make sure to choose features that are attractive and suitable to your type of investment.
Some Bond products generally have a callable nature, in which the issuer can take back the debt securities and then pay the loan principal to investors before the due date.
However, there are also types of investment instruments that offer a step up feature where the coupon rate owned by investors will continue to increase at a predetermined date. So that the profit potential obtained by investors will be even higher.
- Issuer Party
Also make sure to consider the issuer of the debt securities when investing. Avoid the risk of default because the issuer of the debt securities cannot pay the coupon or principal investment value to investors.
Government Bonds are debt issuers that are preferred by investors because they are considered safer. Apart from being directly supervised by the Financial Services Authority, Bonds issued by the government also have a lower risk.
To avoid default cases as experienced by many other investors, you can invest through Bonds issued by the government. That way, you will feel safer and comfortable when investing.
- Assets Claim
Each investment instrument or product, of course, has its own risks. Therefore, choose an investment instrument that offers assets claim for investors.
When the Bond issuer fails to pay you or suddenly goes bankrupt, the right to receive asset sales will be prioritized to investors.
Things like this are very important for every investor to understand. Thus, you are still entitled to benefit if a default occurs later down the line.
- Maturity
Don't forget to pay attention to the maturity schedule of the Bonds you choose to invest in. You need to match the maturity date to your investment goals. So you can avoid the risk of loss.
Generally, each investment instrument and product offers various maturity schedules. Some last one year, two years, or even five years. The shorter the maturity duration, the lower the risk faced when compared to a longer maturity duration.
Benefits of Investing in Government Bond Instruments
Despite its risks, investing in Bonds also offers various benefits for investors. Investing in Bonds will provide benefits in the form of fixed income from periodic interest coupons that have been determined by the issuer.
When compared to Fixed Deposit rates or the BI Rate, Bonds offer relatively higher interest. Not only that, the maturity schedule of the Bonds will also determine the amount of interest given to investors.
In terms of capital gains or the difference between Bond sales, profits will be obtained when investors sell Bonds in the secondary market. Generally, buying and selling Bonds is stated in the form of a percentage.
For example, the cost of the Bonds is IDR 1 million. When buying and selling on the secondary market, the price will increase to 110 percent or in other words, the value of the bonds will reach IDR 1.1 million.
Bond Investment Made Easier with DBS Treasures
There are many benefits that you can gain when you choose DBS Treasures priority banking as your investment partner. Here are some of the advantages that you need to know as an investor.
- Regular Coupons Available
Bonds at DBS Treasures offer regular coupons that will be paid periodically throughout the investment period.
- There is Capital Gain Potential
Several types of Bonds can be sold at any time, even before the scheduled maturity date. In addition, investors will also gain potential profits from rising Bond prices.
- Competitive Coupons Available
Investors are also entitled to a competitive coupon rate above the average interest rate on Fixed Deposits.
- No Additional Fees
Investors are not charged any additional fees. There is only the spread or the difference between the selling price and the buying price (bid and offer).
- 24/7 Transaction
You can access various types of Bond products that can be traded through the digibank by DBS Application. Interesting, right?
Are you ready to allocate some of your funds through Government Bonds? Invest now through DBS Treasures who will provide curated insights that suit your risk profile, so you make a move confidently with solutions only for you. For further information regarding Bond investment, please visit the following link .
