BONDS VS STOCK INVESTMENT, WHICH IS MORE PROFITABLE?

BONDS VS STOCK INVESTMENT, WHICH IS MORE PROFITABLE?

One way to make money work for us and gain long-term returns is by investing. There are many types of investments that are popular in Indonesia, such as stocks and bonds. These two types of investments certainly have different risks, profit potential, and asset allocations according to the investor's risk profile.

What is a Bond?

Bonds are medium to long term bonds issued by the state or company. The reward is in the form of interest in the form of coupons for a certain period and the principal will be repaid at a predetermined time. Bonds can be classified as debt securities in addition to Sukuk.

When are Bond Coupons Paid?

Bond coupons will be paid at certain predetermined periods, such as per month, per 3 months, per 6 months, or annually. After the term of the bond expires, the investor will receive the principal along with the last coupon payment.

What are Shares?

Shares are proof of investor ownership of a company that entitles the owner to participate in company decision-making and obtain a share in the company's net income.

Where do stock profits come from?

Shareholders benefit from an increase in share price (capital gain) and dividends paid by the company in accordance with the number of shares owned. Dividends are usually paid annually and will be distributed when the majority of shareholders agree to distribute dividends.

The Difference between Bonds and Stocks

The main difference between stocks and bonds is the risk and potential reward. Bonds carry less risk than stocks, but the potential for returns is also lower. On the other hand, stocks carry a higher risk, but also have a higher profit potential.

For investors looking for stability and a steady income, bonds may be a good choice. For investors who have a longer investment period and are looking for higher profit potential, stocks may be the right choice.

Illustration of the Difference between Bonds and Stocks

On September 26 2022 - October 20 2022 an offering of one of the bond products took place, namely ORI022. If an investor chooses to buy ORI022 bonds, then the investor will invest with a coupon of 5.95% per year which will be paid monthly with the risk that the price of the bond could fall below 100 or below par (nominal value). If the investor does not sell it, he will get a passive income of 5.95% for a year which will be paid monthly.

Meanwhile, if an investor buys BMRI shares on September 26 2022 at an opening price of IDR 9,125 and sells them on October 20 2022 at a closing price of IDR 9,900, then the investor has enjoyed a price increase of 8.49%.

If on September 26, 2022, investors buy WIKA shares at an opening price of IDR 1,005 and sell them on October 20, 2022 at a closing price of IDR 905, then the investor has suffered a loss from a price decrease of -9.95%.

Which is More Profitable? Stocks or Bonds?

To determine this, you need to know your investment goals again. If your investment goal has low urgency and can accept the risk of price declines over a very, very long period of time, then stocks are the right choice. However, if your investment goal is for a shorter term and prioritizes stable returns, then bonds are more suitable for you.

However, it never hurts to invest in stocks and bonds together for diversification purposes. Proper asset allocation and risk considerations can help you achieve your financial goals and minimize the risks that come from the investments you make.

You can invest in stocks and bonds simultaneously through one integrated account at POEMS ID. Select the ProStocks menu to invest in stocks and the ProBonds menu to invest in bonds in the form of Government Securities (SBN) according to a set schedule.

One of the interesting Government Bonds (SBN) products to buy is the Retail Sukuk series SR018T3 and SR018T5 which are sharia investment products with higher yields than deposits of state-owned banks and are 100% safe guaranteed by the state amid the current economic uncertainty.