Not to side anyone but i also have to disagree with your post as well
1. FD is capital guarantee and rather short term. I get back all my capital + interest and i dont need to care about what happens to market prices in the world eg Fed interest rate. Not happy with FD - just unwind and redeposit...At most lose the interest and that usually is enough to cover the admin fees.
2. And since you are so knowledgeable about bonds, you should also know what you are referring to interest (coupons) is not the right way to evaluate the bonds "interest rate". For bonds, we look at the yield to maturity which is equivalent to the effective interest rate for FD. The Temasek bond you mentioned yield to maturity is closer to 3.5% . See this link
https://www.bondsupermart.com/main/b...t/SG7W86960343
Moreover, this bond maturity is 2050... u wait long long if you ever want to see your capital back again without getting hit again by transaction fee for unwinding + the bid/ask spread. And if you ever need to unwind.. u better pray interest rate has dropped significantly (unlikely) from the time u purchased the bond.. otherwise u lose even more.
So, you happy with your bond.. i happy with my FD...
And i dont have so many 250k like u can buy so many bonds. I just small time player but i can put many FDs.
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Originally Posted by BusinessSingapore
Thanks for the reply.
However I have to disagree on most if not all points.
Bonds come in "shapes and sizes" from sovereign to corporate issuers; from AAA rated to unrated. To put it simply, there are safe ones and there are speculative ones. The one that you mentioned happened to be the ones with a high level of risk, issued by an industry that is undergoing a lot of challenges now. Swiber ISIN SG55E0991457 bonds are High Yield unrated Bonds that pays 7.15% coupons, that itself should already hold enough information to tell investors this is a riskier bond, from the name itself high yield, unrated and high coupon. So no, its not a fair comparison for a low risk appetite investor.
However, if you look at bonds that are more in context say an AAA rated bonds by Temasek Holdings SGD issued bonds ISIN SG7W86960343, you are looking at a 4.2% coupon (interest) which is a good 2X to 3X higher than a FD. And if you are concern about liquidity and ticket size since bonds tix size is usually 250K and up then go into a SGD bond fund that buys into local bank bonds ( OCBC UOB DBS), Temasek Bonds and SG Gov Bonds. If you pick a top 10% peer group rating SGD bond fund you will be yielding 3%+ Net of management fees averagely.
My position is simple, picking the most efficient returns on the same level of risk. To me, the risk of FD is the bank's chance of default and whether or not the bank defaults depends on the SG Gov (local banks). So ultimately I am placing a bet on SG Gov, and if I can put my money into Temasek, DBS SG Gov Bonds that gives me more returns, why should I want to put it into FD when the underlying risks are the same?
That said, I fully understand (after reading the replies by both of you) your positions and I have to conclude it is seeking emotional safety(very impt btw) but it isn't factual.
You gotta be joking man, all major index across the world has returned positively over the past 12 months and I mean all, literally. Time to open your eyes and make a killing now.
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