The popularity of bonds as an investment so far is still under deposits and shares. However, that does not mean bonds are investments that are lonely enthusiasts.
Evidently, the Indonesian Retail Bond, aka ORI, is always running out as those who want to invest.
Until now, the government through the Ministry of Finance has issued ORI 15 times. ORI015 is the last state bond sold in 2018.
You could say ORI015 managed to attract many people. How interesting? Coupons aka returns offered at 8.25 percent per year. So the sales can reach Rp. 17.6 trillion, exceeding the target of Rp. 10 trillion.
Just so you know, this one investment instrument is not just ORI, but many other types that may not be very intense news.
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What are bonds?
Some say, bonds are similar to accounts payable. It’s not wrong, it’s just not right.
More precisely, bonds are term bonds issued by the State or company. The time period is from 1-10 years.
In fact, bonds appear in the form of an agreement. This letter details the amount of the loan, the coupon, until the due date. In fact, the buyer’s name or owner is also included in it.
With you owning state or company bonds, that means the country or company owes you as much as promised. The state or company is also willing to return it at the agreed time, and pay the coupon every month.
Just like stocks, bond issuance is a way to raise funds from the public. Countries that need funds for infrastructure development or companies that need funds for business expansion make bonds a funding source solution.
Most bonds can be owned by anyone. In fact, foreign investors are allowed to buy it. However, there are also those whose sales are specifically for Indonesian citizens, such as those issued by the state.
To buy bonds, you can get them on the primary market and the secondary market. In the primary market, bonds with an Initial Public Offering or IPO are offered to individual investors or institutions that are considered underwriters or potentially buy underwriters.
While the secondary market in question is, can be obtained at the stock exchange or designated distribution partners. For example, state bonds sold by distribution partners such as banks.
The advantage of choosing it as an investment
Because it is one of the investment instruments, of course there are benefits obtained by placing money on this instrument. Anything?
- Get periodic coupons as investment returns. Coupons are given every month, three months or every six months. Coupons are divided into fixed coupons and floating / variable coupons.
- Get capital gains for selling bonds. For example, the price of rays or the initial is 100 percent. One year it turns out the price has risen to 120 percent. If you sell it at a price of 120 percent, the difference is 20 percent, that’s capital gain.
- Definitely paid along with the return obtained specifically for state bonds because guaranteed Law No. 24 of 2002 or Law No. 19 of 2008.
- The profit from the coupon is higher than the interest earned on the deposit.
- Can be used as collateral.
Weakness makes it an investment choice
Whatever the investment, there must be some disadvantages. There are some disadvantages to this investment that you need to know.
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- The risk of default is a result of the loss of money that becomes a bond fund. Not only money, the rest of the coupons that have not been paid are also lost. This risk occurs in bonds issued by the company. While for ORI, this doesn’t apply.
- The amount of the coupon given depends on the Bank Indonesia benchmark interest rate. Usually this happens for floating coupon bonds.
- Bond prices also depend on the amount of interest. If interest rates rise, prices fall. Conversely, if interest rates fall, prices will rise.
- Selling when it’s not right can cause loss or capital loss.
What are the types?
There are several types of investments on this one. Generally the types of bonds outstanding depend on the issuer. What are the types?
- Corporate bonds or corporate bonds, one of a kind issued by state enterprises or state-owned or private companies. For example, PT Tiphone Mobile Indonesia Tbk issued Rp. 500 billion.
- Treasury bonds or government bonds, bonds issued state. For example, Retail State Oligation or ORI.
- Regional bonds or municipal bonds, the type issued by the Regional Government.
Until here, you understand? One thing you need to consider before choosing this instrument is the investment period.
As you know, bonds are investments that have an annual period. Already so during that time period, it can’t be arbitrarily withdrawn. At least half can be withdrawn, and even then at a certain time.
Therefore, you must make sure the funds used to buy bonds are not emergency funds. Because, you can bother later if you need these funds at any time.