Currently, the rate of inflation both globally and in Indonesia is increasing. Based on data released by the Central Statistics Agency (BPS) in August 2022, the inflation rate from August 2021 to August 2022 in Indonesia was 4.69%.
This is certainly one of the important considerations for those of you who want to invest. Amid the current inflation, experts suggest that investors can invest in several investment instruments that are safe and stable.
An example of a fairly stable investment instrument is Government Bonds or Government Securities (SBN). This is supported by expert statements which state that the yield curve for SBN yields with short tenors can reach 5-7.3%.
Why Should You Invest in Bonds?
Inflation does pose many challenges, but don't worry, you can minimize the impact of inflation by preparing your finances as early as possible through investment.
Currently available investment instruments are very diverse. Starting from gold, land, buildings, Fixed Deposits, stocks, Bonds, and Mutual Funds. Of the many types of investment instruments, you can choose which one best suits your investment goals.
Even though investing has its own risks, with the right strategy, you have the potential to gain attractive profits. Especially to deal with current inflation, you can choose investment instruments with low risk, one of which is Government Bonds.
Impact of Inflation on Bonds
When a country experiences inflation, this is something that naturally happens as long as the inflation rate is not too high or not too low. If inflation occurs at a level that is too high, it indicates that the country's economy is growing too fast.
Therefore, the central bank needs to raise interest rates in order to slow down and control the growth, so that inflation does not have too much of an impact on society. However, with the increase in interest rates, the price of shares or Bonds will decrease.
Inflation will certainly provide benefits for you as an investor because you can buy Government Bonds at a lower price. Later, when the economic situation stabilizes, the price of these Bonds can increase again.
Conversely, if inflation is at a very low level, it can indicate that the country's economic growth is too slow. In these conditions, it is necessary to reduce interest rates as a stimulus for economic growth.
This will cause people's purchasing power to increase. The low inflation rate will also have an impact on rising stock and Bond prices.
Advantages of Bonds Investment
If you already know what Bonds are, now is the time for you to find out what benefits you can gain from investing in this instrument. Here's the explanation:
- Gain Coupons Regularly
You can gain the profit of investing in bonds in the form of coupons every month, every three months or every six months. Depending on the coupon distribution policy.
There are two types of coupons, namely fixed coupons and floating coupons.
- Earning Capital Gains
When you decide to sell Bonds in the secondary market, you have the potential to earn a profit or also known as a capital gain. This profit is obtained from the difference between the selling price and the buying price of the Bonds.
Like stock prices, Bond prices can increase and decrease depending on market demand.
- Capital Repaid Guarantee with Profit from Coupons
Government Bond investment has been regulated by the government in Law No. 24 of 2002 concerning Government Bonds and Law no. 19 of 2008 concerning State Sharia Securities.
Therefore, you don't need to worry, because the security guarantee is clear. Even throughout the investment period, you will gain profit from coupons.
- Relatively Higher Bond Coupons Compared to Fixed Deposits
You need to know that the percentage of Bond coupons is relatively higher when compared to the average Fixed Deposit interest. That is why many people consider investing in Bonds in order to gain the maximum potential profit.
- Can Be Used As Collateral
Bonds can also be used as collateral to get a loan from a bank. Not only that, Bonds can also be used as collateral when you want to buy shares on the stock exchange.
- Suitable for Portfolio Diversification
Diversification can reduce the investment risk that might occur. Bonds can be one of the choices because they have stable and predictable yields so that they can reduce financial risk.
Of the many benefits that you can gain, it will be more profitable for you to invest when inflation hits. This is also supported by data from the Organization for Economic Cooperation and Development (OECD) which estimates that the Indonesian economy in 2022 will grow by around 4.9% year-on-year.
Apart from inflation sentiment, the SBN market was supported by good news from Indonesia's manufacturing activity which rose to 53.7. This is a pretty good sign for those of you who want to start investing in bonds.
Investment in Government Bonds with DBS Treasures
If you are not too sure about investing in bonds, you can become a DBS Treasures priority banking Client.
DBS Treasures makes it easy for you to confidently choosing the right type of bond investment. There are various benefits that can be obtained from investing in Bonds at DBS Treasures, such as:
- Regular Coupons
Providing regular income in the form of Bond coupons which are paid regularly during the investment period by the Bond issuer so that it can become your fixed income.
- Potential Capital Gains
Several types of bonds can be sold at any time before maturity and gain potential profits from rising Bond prices.
- Competitive Coupons
Provides a competitive coupon rate above the average Fixed Deposit interest.
- No Additional Fees
Only the spread or the difference between the selling price and the buying price (bid and offer).
- 24/7 Transaction
There are a variety of Bond products that can be traded on the digibank by DBS Application.
From the various advantages of Bond investment that can be obtained above, you can make Bonds as one of your investment instruments. But keep in mind, make sure you diversify your investments so that your funds remain safe and avoid risks that might occur in the future.
Enjoy the convenience of investing by choosing the right type of Bonds for you with DBS Treasures and gain the potential profit you want. Check out complete information about Government Bonds through this page https://www.dbs.id/id/treasures/investasi/structured-product/investing-in-bonds.
