Investing in Bonds? This Is Why You Need To Invest With iFAST Global Markets
Bonds investment should be included in every individual’s investment portfolio. A bond is a type of fixed-income security that offers a steady stream of returns. Additionally, it provides a degree of stability to your portfolio and helps to preserve your capital.
Many investors make the mistake of deploying their entire investible surplus into shares. They reason that the stock market can provide high returns. Investing in bonds will only provide a return of 2% or 3% per year or a little more than that.
The investors who favour stocks over bonds are right to a certain extent. In the last one year, the Singapore Straits Times Index has gained about 17%. Some individual shares have performed even better.
DBS Group Holdings, the parent company of DBS Bank, has seen its share price rise from S$17.62 a year ago to its current level of S$24.68, a gain of 40% over the previous 12 months.
Similarly, Delong Holdings, a Chinese steel company that is listed on the Singapore Exchange, has seen its share price register a nine-fold increase in the last one year. (Share prices considered from 21 December 2016 to 21 December 2017.)
Why should anyone invest in bonds when the stock market can provide such high returns?
But the rise in the stock market over the last year does not tell the whole story. In the 17-month period from October 2007 to March 2009, the STI lost over 50% of its value. In fact, the index has still not regained the peak that it had achieved in 2007.
The stock market can be very volatile and you could wait for years to recoup your initial investment if you buy when share prices are high.
What is the solution? Bonds offer an excellent diversification option. They protect your portfolio from volatility and even offer the possibility of capital appreciation.
Ready to diversify your portfolio with bonds investment? Learn more here.
Investing in bonds – finding the right platform
There is a wide range of bonds available in the market. The return that you can earn varies from about 1.5% to 2.5% for government bonds to 6% to 7% for corporate bonds. In fact, it is possible to earn an even greater return than 7%. But the risk is directly correlated to the return.
A bond that provides a high rate of interest may seem very attractive. But your principal amount could be at stake.
Which types of bonds will you purchase? You have to choose between:
- Sovereign bonds – these are issued by governments and carry a low level of risk.
- Quasi-sovereign bonds – companies owned by governments issue these. The risk is low and the yield may be slightly higher than that offered by sovereign bonds.
- Corporate bonds – these are bonds raised by companies. The funds can be used to finance new projects or to provide capital for their existing operations.
- High-yield corporate bonds – the rate of return is higher, but so is the risk of losing your capital.
- Retail bonds – these are corporate bonds that are traded on the Singapore Exchange.
In addition to selecting from the various categories of bonds that are available, you also have to choose a bond issuer. For example, if you are purchasing a corporate bond, it is necessary to understand the credit profile of the issuer. Will the company be in a position to pay interest on a regular basis? Will you get your principal back on the committed date?
As you can see, buying bonds is not a simple exercise. You need the help of a reliable adviser assisted platform, and iFAST Global Markets (iGM) is an excellent choice.
Here are some of the benefits that you get if you transact bonds through iFAST Global Markets (iGM):
- iGM allows you to get the best possible prices for your bond purchases.
- There is absolute price transparency on the IGM. You will be told exactly how much you have been charged for the transaction.
- A wide range of bond offerings are available. You also have the freedom to purchase selected bonds in the local currency. This gives you the advantage of making profits on exchange rate gains. Of course, you could lose too, if the foreign currency appreciates against the Singapore dollar.
- You can be informed about primary market issues. The iGM research team regularly produces articles that can help you understand these issues better too.
There are several other benefits that iFAST Global Market offers. You get access to the in-house research team’s insightful <Bond Market Monitor.
Investing in wholesale bonds
The standard investment sizes for wholesale bonds are fairly large. The minimum investment amount that an accredited investor has to put up is S$250,000. For bonds denominated in US dollars, the amount is US$200,000
In an effort to address the issue of having to invest a large amount in a single bond, iFAST Global Markets has introduced iFAST Bond Express. This provides accredited investors with the opportunity to make purchases in lot sizes as low as 5,000 denominations. This gives investors great flexibility. You can now diversify your bond portfolio with ease.
What’s more, iFAST Bond Express allows you to make purchases at firm prices. iFAST Financial Pte Ltd deals as the principal and quotes the price. This ensures certainty to your trade and allows you to make well-informed investment decisions.
You are in good hands with iGM
iFAST Global Markets was launched to provide investors with suitable advice, in a transparent and ethical fashion. At the same time, it provides a comprehensive range of more than 800 different bond offerings to its customers.
Since its inception, the iFAST platform has built a regional presence spanning the region, from Singapore to Hong Kong, Malaysia, China, and India.
If you are planning to begin investing in bonds or if you want to increase the size of your bond portfolio, iFAST Global Markets offers an excellent option. Their Investment Advisers are knowledgeable in the latest developments in the bond market and will be able to guide you in your purchasing decision.
Ready to start investing in bonds?
This article was written in partnership with iFAST Global Markets. All views expressed in the article are the independent opinion of ZUU.