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Advantages and Disadvantages of Bond Investments You Need to Know!!!

zebrablog.net - Although it is not as popular as stocks and deposits, letter-of-loan capital is also one of the types of government-valued investment (SBN) that is worth thinking about. As such, the Indonesian authorities issue SBN type of loan letter regularly as an instrument that has the potential to generate profit.

Usually, the authorities issue tradable retail type loans aimed at large citizens who are Indonesian Citizens (WNI).

The loan letter is listed in the government loan order (SUN). This message is issued by a party and then transferred to the holder of the loan certificate who is committed to paying off the main loan and interest when it is due.

Some of the parties who generally issue loan letters include rulers, both in their country's currency or foreign currency, regime bodies, and private industry.

For more details, follow the next description.

What is Bond Investment?

A loan letter is a government loan message issued by a government, agency, or industry with a specific duration. If you have a loan letter, then that means the country or the loan letter maker has a loan of the amount that has been promised to be paid to you according to the agreed maturity period.

The profit to be obtained from the holder of the loan letter starts from the interest or bill paid by the printer of the loan letter or commonly called the debtor. Profits are generally paid out monthly for a pre-agreed duration.

Types of Bond Capitalization

If you want to donate in the form of a loan letter, first identify the types of these next loan letters.

1. Government bonds

This loan order is usually issued by the government through the Ministry of Finance and offered to the public to finance the calculation of the government's income and expenditure (APBN).

Because the printer of this loan message is the government or the state, so the capital of this type of loan letter includes comfortable and guaranteed capital by the state. Not only that, you can also access them easily because the authorities regularly produce this type of loan letter.

Some of the government loan letters that are often encountered are Indonesian Retail Loan Letters (ORI) and Retail Sukuk (SR). You can access it from various distribution partners, both banking and non-banking services.

2. Savings bonds

This type of loan letter is generally issued by the debtor in the form of funds with a fairly small nominal. Investors who generally buy loan letters are natural investors. Many people choose a loan letter because the benefits are greater than savings.

3. Fixed rate bonds

As the name implies, this type of loan letter offers a fixed nominal interest rate. Profits from funding this type of loan are profits that are accepted to be issued regularly as long as the loan is legal. This is one of the advantages offered and favored by investors.

4. Floating interest rate bonds

If the interest rate loan letter always has a normal amount of profit, then this type of loan letter actually has a changing interest rate. This type of loan letter is often called a floating rate note (FRN). The amount of interest that will be obtained the next day refers to the money market indicators.

5. Interest-free bonds

It is known that with an empty coupon bond title, this type of loan letter does not distribute interest or bonds to investors. Even so, you can find the full price and principal portion of the loan at maturity.

6. Inflation bonds

In line with its name, this loan letter has a main loan figure that refers to an inflation indicator with a much lower interest rate than a regular interest loan letter. The repayment rate for this type of loan will increase along with the development of the main loan figure which is affected by inflation.

7. Corporate Bonds

This type of loan letter is issued by all industries with a higher profit rate than the other six types of loan letters. However, the level of risk is also high, so you need to first analyze this aspect before finalizing this type of loan.

Advantages of Bond Capitalization

After knowing what loan letter capital is and its types, it's time for you to know what benefits are offered from this one capital instrument.

1. Get interest regularly

As stated above, letter of credit capital is investment that offers profits in the form of interest or bonds on a regular basis, be it every month, every 3 months, or every 6 months. The 2 types of bonds that exist in this capital design are fixed (always) and floating (hold or not always) bonds.

2. Get capital gain

Capital gain is the profit that can be obtained from the difference between the selling price and the purchase price. This profit is what you can have the next day when you sell loan letters to investors in inferior markets. The price of the loan itself is volatile, depending on market demand.

3. Get the certainty of payment back

One of the advantages that can be obtained from the capitalization of loan letters is clarity in terms of repayment with interest bonuses or bonuses. However, it should be noted, that this clarity can only be obtained if you fund the type of government loan letter.

4. Get bigger profits than deposits

One of the things that investors generally think about is the level of profit. By investing capital in the legacy of the loan message, you have the potential to find a bigger profit than the general interest offered by deposits.

5. Can be used as collateral

Not only can it make a profit, a loan letter can also be used as collateral or collateral to get a bank loan. Moreover, you can also use this one capital instrument as collateral when you want to buy shares on the impact money market.

Disadvantages of Bond Investment

When you want to donate, it's definitely not just the advantages that you need to think about. You also need to think about the lack of capital for this next loan letter.

  1. In general, the promised interest rate from the capitalization of the loan message is very dependent on the amount of interest in the financial market. If the price of a loan letter goes up, the interest rate will go down. Likewise the opposite.
  2. Even though there is a comfortable capital, loan letters also always have the potential to cause losses. The risk that may occur is that you fail to give money, especially if the debtor is unable to pay off the interest and principal of the loan.
  3. It is possible that the loan letter printing company will carry out a revocation before the due date. However, this matter could happen if there is such a requirement in the contract contract.
  4. Not only depends on the amount of interest in the financial market, the rate of return on the loan letter budget also depends on the economic or political situation of a country.
  5. The risk of capital loss can occur if you sell the loan before the maturity period. This is because the selling price is lower than the purchase price.
To avoid various risks of loss, you need to monitor the progress of the loan price on a regular basis and stay away from marketing leftovers before maturity.

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