What are bonds?

Bonds are a form of fixed income securities issued by governments or companies to raise funds from the financial markets. Most bonds pay a steady stream of income (known as coupon payment) at regular intervals throughout the tenor of the bonds. They also provide an alternative means to diversify an investment portfolio.

Benefits

  • Regular and stable income stream
  • Potential capital appreciation
  • A wide range of selection from high grade to high yield bonds to suit your needs and risk appetite
  • Alternative investment product to diversify investment portfolio which can help to reduce risk concentration in any one assets class within a portfolio.

Understanding the Risks

Some of the risks associated with bonds include:

  • Price and interest rate risk – bond price is inversely related with interest rates; hence higher interest rates would result in lower bonds prices and vice-versa.
  • Credit risk – Any downgrading in the credit rating of a bond issuer would affect its repayment ability, resulting in the depreciation of the bond price.
  • Default risk – Investors may lose all or a substantial part of the invested amount if a bond issuer defaults on payment.
  • Liquidity or market risk – Bonds are typically traded over-the-counter, which could result in some bonds being less liquid than others. The demand and supply dynamics of the market will also determine the secondary market prices.

To find out more about bonds and other investment options available to you, call 226 8823/8826 or visit Baiduri Capital office.