Are you sure BONDS are the right investment for you?

A bond is a capital market term meaning a statement of debt owed to bondholders. Simply put, the issuer of the bond is the party that owns the debt and the bondholder is the party that owes the money. When you own a bond, it is usually written as interest (a coupon) on the debt when it matures, which is the bondholder's responsibility.

In Any Country, the maturities of these bonds range from 1 to 10 years. The purpose of issuing these bonds is to raise money from the public as a source of financing.

One of the reasons for the popularity of bonds is that they can be bought and sold and are relatively safe. The security is very good, because this link is related to the government, so the operation is relatively safe. Link Type

There are several types of these links, each with its own reference. Various references to the types of outstanding bonds, such as interest payment system, exchange rights, issuer, guarantees, among others. But in my country itself, there are 3 types of bonds based on the issuer, namely:

• Corporate bonds

This unique bond is issued by private and public companies (BUMN). For example, a private company ie PT. Astra Honda Motor (AHM) issued three-year fixed-rate bonds of IDR 500 billion in 2017.

• Government bonds

As the name suggests, this type of investment is issued by the government. Indonesia itself first issued these bonds in 2006. In the early days of these links, people started trying to connect and became interested. For this reason, the government called them Government Retail Bonds, or ORI.

• Municipal bonds

We know that bonds are bonds issued by the State, which is why the municipal government also has bonds that are developed especially for the interests of the people of the area.

Interest-based payment system

For this single bond, interest is paid at the same time, i.e. at maturity.

1. coupon voucher

These bonds make periodic payments as specified by the issuer. Fixed bond bond

The obligation is paid in stages according to the coupon rate determined before the start of the initial market quotation period.

2. Floating coupon bonds

The latter are floating coupon bonds on which the interest rate is fixed until a certain maturity date or with reference to various conditions. Like ATD or Medium Term Deposit.

As mentioned above, there are many types of links, each with a different basis. Because it is important for those who want to invest in this investment vehicle to understand each type. In addition to the types of bonds, one should also know their advantages and disadvantages, since bonds, like many other investment tools, have their advantages and disadvantages.

Advantages of bonds

Bondholders can earn relatively higher interest rates (coupons) than many other investment vehicles, such as deposits, offer. The types of coupons are fixed coupons and floating coupons. These bonds are easily traded in the secondary market, either through the Indonesia Stock Exchange (IDX) or outside IDX. These bondholders typically make capital gains from the difference in the price of the bonds being traded. Bonds can also be used as collateral when applying for credit from a bank

Investing in bonds is one of the safest investments compared to other investments because the principal and coupon payments are legally guaranteed.

Lack of bonds

Despite their advantages, bonds also have disadvantages such as:

Although we have mentioned that bonds are a safe investment, bond issuers may face defaults. However, this does not apply to legally protected government bonds. Vulnerable to adverse interest rate, economic and country conditions. Because these things also have an impact on financial markets. Selling bonds before maturity can result in losses for investors because the sale price is lower than the purchase price. Choose the most suitable tool according to your preferences and don't start investing in something you don't understand. Wherever you invest, remember to diversify to avoid the risks involved. Conditions of the bond transaction

Debt securities are typically traded through over-the-counter (OTC) mechanisms. The exchange offers a special system to facilitate the trading of debt securities called FITS (Fixed Income Trading System).

In addition, there is a system for reporting bond transactions, also known as CTP-PLTE (Central Trading Platform - Reporting on Securities Transactions). CTP-PLTE is an electronic system that can be used as a means of trading and reporting transactions in debt securities.

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