As more and more people find it difficult to survive or live comfortably on their current salaries, the growing cost of living has been a regular subject of debate and discussion among Singaporeans this year.
Being paid a fixed monthly salary may not be enough for most people anymore, so they are looking for ways to stretch or expand their money. Fixed deposits will likely be the best investment option or means of saving for those who are not familiar with them. Fixed deposit interest rates of between 3 and 4 percent, as stated by the government, may no longer be sufficient due to the inflationary trend.
So what is the greatest plan of action to optimize your financial situation going forward? This is the time to abandon (some) caution if you are the traditional fixed-deposit investor who is risk-averse and dives into investing in bonds with low risk but higher profit.
An investor invests in a debt security bond by making fixed-interest money to a corporation for a predetermined length of time. In contrast to a fixed deposit, where you deposit your money at a bank, when you invest your money in a firm, you essentially lend it to them.
So why would you prefer investing in bonds over the trustworthy fixed deposit when bonds are more intriguing and mysterious? Many investors find it easier to compare bonds to fixed deposit accounts, the most common fixed-income investment.
Like fixed deposits, investing in bonds can result in a steady interest income typically higher than the interest from standard bank rates for a similar term.
Before you choose bonds, check out some of their shortcomings:
Bonds can experience changes
A bond’s value may change daily depending on the state of the market. Daily fluctuations, though, shouldn’t be a reason for alarm if you are considering it as a medium- to long-term investment. You should be ready to commit your money to bonds for the whole investment period; if you decide to sell bonds before they mature, you risk losing some or all of your investment.
Whatever the market price of bonds, if you retain them until maturity, you will most likely receive your entire investment back.
Bonds provide no security
Investing in bonds does not guarantee protection from an issuer or business default. Because your investment is not fixed, you might not be able to get your money back if the company you invested in declares bankruptcy.
However, given the current state of the economy, there is very little chance of a listed company failing.
Are you prepared for a life on the go?
If you’re still unsure about investing in bonds over fixed deposits, consider fixed deposits as short-term savings options rather than investments. In contrast, bonds should be viewed as long-term investments.
Consider both and other products to diversify your portfolio. This is a lot for a novice investor to comprehend. We recommend doing ample research, asking questions, and engaging a financial counselor if you’re considering investing in bonds or finding the information here quite overwhelming.