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4 Things About Bond Investing that Beginner


Nov 13, 2020
4 Things About Bond Investing that Beginner

Investors Should Know Bond investment may not be as popular as gold, property, or stocks. However, getting here, it seems that the hopes are getting brighter, because the government itself is also quite aggressive in introducing this type of investment to the public. How about you? Are you familiar with this one investment product yet? If not, try reading this article to the end, who knows it will make you more confident in trying to invest in this one instrument.

What is Bond Investing?

Bonds are one of the capital market products in the form of debt statements issued by certain parties with the promise of returning the principal debt plus interest within a certain period. Bond issuers can be individuals, corporations or companies, it can also be government. Especially for government bonds, last month the government launched it. Maybe you also read the news, or have even participated in providing loans to the state.

This bond investment is suitable if it is used for medium to long term financial goals, because the maturity is usually between 1 and 10 years. Usually, bonds are issued with the aim of obtaining additional fresh funds for capital for the company. For the government, bonds are one of the ways to get loans to overcome the state budget deficit, and to invite us to play a more active role in supporting state development programs. Instead of debt to foreigners, is it better to debt to citizens themselves?

Excess Bond Investment Among investment products, bonds have several advantages or advantages, namely:

• By investing in bonds, we as investors are entitled to get interest or coupons. If it is a government bond, this coupon will be given regularly. So, it looks like we get fixed income. So, that’s why there are fixed income mutual funds – which we will discuss specifically later as well.

• There are 2 types of coupons or interest that usually accompany bond offerings, namely flat interest –that is, interest which is fixed and given regularly – and floating interest –that is, interest whose magnitude varies, following policies and markets. Each type of flower also has its pluses and minuses – which we will discuss sometime further to get to know the differences between the two. With this choice, we can weigh according to our needs, which bonds are more suitable for us to invest in.

• The coupon or interest rate will be greater than the average deposit interest offered by the bank

• Bond investment is relatively safe, especially if we provide loans to the state because there are laws that protect.

• For experienced investors, these bonds can be resold on the secondary market so that they can get benefits in the form of capital gains from the difference between the purchase price and the selling price. • State bonds can also be submitted as collateral to obtain other funds. Disadvantages of Bond Investments Although relatively safe, there are risks associated with investing in bonds. Anything?

• Risk of default, which is when the borrower cannot pay interest, sometimes even events, the principal of the debt also doesn’t return

• Bonds are highly dependent on changes that occur outside, for example, the economic or political conditions of a country, thus affecting capital market conditions. Several Types of Bond Investments that Beginner Investors Must Recognize There are actually many types of bond investments that can be found, each based on the issuer, the amount of interest, the maturity period, and so on. If you want to explain everything seems unlikely, even more confusing. Is that right? So, as a beginner investor, you only need to recognize these 3 types of bond investment first.

1. Corporate bonds

These bonds are debt securities issued by a company that wants to borrow funds from other parties. Companies here can be (companies choose the government) or private. The terms and conditions are usually not much different from government bonds. However, it is more personal because the amount of interest and maturity can be mutually agreed between the borrower and the investor.

2. Government bonds

Namely, debt securities issued by the government of a country, as evidence of borrowing funds to its citizens. Indonesia began issuing bonds to the public in 2006, and since then there have been routine bonds issued every year. Even up to two times a year. If you want to participate in this country’s lending program, keep updating it on your social media accounts or the Ministry of Finance’s website. So that you don’t miss the news.

3. Municipal bonds

These debt securities are also issued by the government, but not by the central government as well as by local governments. Usually these bonds are issued by local governments in order to reduce the burden on the APBD and reduce the dependence of funds on the central government.