For you beginner investors, it is very important for you to know the variety and type of investment that suits your needs and tastes in investing.
At present, there are many choices for people to invest, including; in the form of foreign currencies (forex), property, gold, or in the form of shares, mutual funds or bonds.
Well, for those of you who like investment in the form of fixed income or bonds, it needs to be understood first what is meant by Bonds.
Reporting from investopedia.com recently, it was stated that Bonds are letters of proof of debt issued by the company to its holders in return for a certain amount of interest.
In each bond, the nominal value of the bonds and the interest rate of the bonds are listed. The nominal value or par value is the value that shows the amount the company must pay when the bond is due. While the bond interest rate shows a certain percentage that must be paid periodically to the bondholders.
He explained, companies that issue bonds are usually caused by large amounts of funds that cannot be met from accumulated retained earnings or from bank loans. Because these bonds have a maturity of more than one year (usually between 5 and 20 years), then if the company issues bonds, it will generate bonds debt. This debt is grouped into long-term debt.
The following are the types of bonds, among others;
Guaranteed bonds and bonds are not guaranteed
Secured bonds are: Mortgage bonds, namely bonds whose issuance is guaranteed by a certain guarantee such as real estate. Included in these guaranteed bonds are trust bonds whose issuance is guaranteed by shares or bonds of other companies.
While bonds not guaranteed are bonds whose issuance is not guaranteed by a guarantee. These bonds are very risky so that if a company issues bonds this type will provide a high interest rate, in order to attract potential investors.
Futures Bonds, Serial Bonds and Bonds Can Be Redeemed
Futures bonds are bonds that have a maturity date. Serial bonds are bonds that have a serial maturity or are due. Bonds can be redeemed are bonds that give the issuer the right to redeem and withdraw the bonds before maturity.
Convertible bonds are bonds that can be converted with other securities at a time after their issuance. Usually this type of bond will be converted into shares.
Registered and Top Bonds Performance
Registered bonds are bonds issued in the name of the owner. Performance bonds are bonds that are not listed by the name of the owner and can be transferred from one owner to another owner simply by submission.
Generally, in the form of fixed income letters can be classified based on time before maturity or maturity.
In this case, there are 3 main categories, namely;
Bills; These debt securities will mature in less than 1 year. Notes ; These debt securities will mature in 1 to 10 years and Bonds ; These debt securities will mature more than 10 years.
Securities that can be traded by the government are known as treasuries, which are usually known as Treasury Bonds, Treasury Notes, and Treasury Bills (T-bills).
Technically, T-bills cannot be said as bonds due to the short maturity of the letter.
City debt, or what is known as ‘munis’ is the next series in terms of risk. Rarely is there a city that is easy to experience bankruptcy, but can occur even though it is rare.
The main advantage of ‘munis’ is the profit or return that will be returned is federal tax free. Also, local governments can make their debt free of tax, so that city debt securities are completely tax free.
Because it is in the form of tax savings, the maturity period of ‘munis’ is usually lower than that of taxable bonds. Depending on your situation, this debt can be a good way to invest.
A company can make bonds the same as forming shares. Large companies have sufficient flexibility to regulate the amount of debt they want to make, in the short term joint debt securities with a period of less than 5 years; medium around 5-12 years, and long term around more than 12 years.
Joint debt securities have a characteristic with high yield due to the high risk of a company compared to the government. But the good side is the high yield from this investment which can be said to be quite profitable for the investors. The quality of a joint company is very important in this case, because if the quality of a company is already high, then it would be nice if we know the quality of a company that we will invest.
Zero Coupon Bonds
This type of bond is a type of bond that has no coupon payments, but is associated with a discount for nominal value. For example, zero coupon bonds with $ 1,000 per nominal and within 10 years with a payment of $ 600; You will pay $ 600 now to get $ 1000 in the next 10 years.