LET'S INVEST BONDS

LET'S INVEST BONDS

Investing in the capital market is not just stocks. There is also such a thing as bonds or debentures. Then, what is meant by the bond?

Unlike stocks, which give ownership rights to their holders, bonds are actually loans that you (investors) give to a company or government. Bonds are long-term debt instruments issued by companies or governments with a nominal value and a certain maturity. Even though there is a maturity date, it does not mean that the bonds are held until maturity, because they can actually be traded on the secondary market.

Debentures or bonds consist of several types:

1. Corporate bonds which are bonds issued by national private companies including BUMN and BUMD.

2. Government Securities (SUN) or securities issued by the government in accordance with Law No.24/2002.

3. Corporate Sukuk which is a fixed income instrument issued based on sharia principles according to the provisions of Bapepam & LK Np. IX.A.13 concerning Sharia Securities.

4. State Sharia Securities (SBSN), which are securities issued by the government based on Islamic sharia in accordance with Law No.19/2008 concerning State Sharia Securities (SBSN).

5. Asset Backed Securities (EBA), which are debt securities issued with Underlying Assets as the basis for issuance.

All of these instruments can already be transacted and or traded reported through the Indonesia Stock Exchange. Government bonds are considered safer because the government has the authority to impose taxes and print money. However, when investors want to choose corporate bonds, always choose bonds that have the highest rating first. This rating reflects the risk of default in paying interest or principal. AAA rating has the lowest risk, then followed by AA, A, BBB, and so on until D which indicates that the bond is in default.

What's more interesting about investing in bonds is that we as investors not only benefit from fixed interest payments (coupons), but also have the opportunity to benefit from capital gains (difference in buying and selling prices).