Investing in bonds

Unlike many countries, Singapore does not need to rely on the issuance of government bonds to finance its expenditure as it operates on very prudent budget. However, in light of the 1997’s Asia Financial Crisis, the Singapore government saw the need to develop the market for bonds so as to meet the banks’ needs for risk-free asset in their portfolio.

One of SG Wealth Builder’s blog missions is wealth preservation and therefore, investing in bonds has always been on my mind. But is investing in bonds suitable for everyone? To answer this question, it depends on which phase of your life you are currently in and the kind of returns you are expecting from your investments.

Generally, for those who are in the twilight stage of their wealth building journey or planning for retirement, bonds offer a source of regular fixed income stream and opportunities for capital gain. But this is not to say that such instrument is safe and of low risk nature. There are certain risks that investors must watch out.

To highlight the risks, many investors were stunned by Swiber Holdings Limited’s swift collapse in 2016. It is unknown whether Swiber bondholders can get back any of their investments.


Default risks

A bond is a form of debt security in which you lend money to the bond issuer. In exchange for your loan, the bond issuer would pay you regular stream of income in the form of coupon. Coupon rate is a percentage of the principal amount, which is also known as the “face” or “par” value. Upon maturity, bonds are redeemed at the face or par value.

Broadly speaking, there are two types of bonds – government and corporate. The former usually come with higher quality credit ratings while the latter are [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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2 thoughts on “Investing in bonds

  • September 19, 2017 at 3:04 pm

    i believe bond is not suitable for general public; as the return is low and entry barrier is high, retail investor gets little benefits to invest in bond unless the counter is leveraged; but if leveraged ever, it is not retail game

  • September 23, 2017 at 9:36 am

    Hi Bruce,

    To a certain extent, I agree with you. My purpose of writing this article is actually to share the differences between corporate bonds and government bonds. But as I research more about bonds, I realize investing in this type of financial is not as simple as I thought it would be. There are so many things to consider that my affect the return.


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