Know Government Bonds, Safe and Risk-Free Investment

Bonds are one of the instruments of long-term investment in the form of a debt statement and can be traded. There are many types of bonds, one of which is government bonds.

If you want to start investing seriously to achieve financial goals for the future, these government bonds are definitely worth studying. This investment instrument is even claimed to be a safe and risk-free type of investment.

What are the types of government bonds, what risks can arise, and what benefits can be obtained from this investment instrument can be found in the following explanation. The more you know, the more you can avoid scams, right?

Types of Government Bonds in Indonesia

Unlike investments in the form of stocks that can be purchased through the Indonesia Stock Exchange (IDX), bonds are indeed only issued by parties with authority, which can be individuals, groups, corporations, or governments.

For government bonds, of course, it is the government of a country that issues them in the currency of that country. Usually, this type of bond is also referred to as government debt securities, as the debtor (bond issuer) and the creditor (bondholder) are terms commonly used in the capital market.

Indonesia itself only became acquainted with government bonds in 2006. There are 4 types of government bonds issued in Indonesia, namely Retail Government Bonds (ORI), Retail Sukuk (SukRi), State Savings Sukuk (ST), and Retail Savings Bonds (SBR). Usually, the government will appoint a bank as a securities institution to act as the selling agent for the bonds.

“Risk-Free” Investment

The term of government bonds, in general, is 1 to 10 years. Within that period, if you invest in bonds, you will definitely earn profits, and the debtor must return the investment funds along with the interest set from the beginning.

Well, government bonds are indeed touted as one of the instruments that are risk-free. This is because the government is the authority that can raise interest rates or even print money, so it can certainly fulfill bond payments when they mature.

Benefits for Bondholders

Both the debtor and the creditor have their advantages, of course. Bondholders can “store” their money and earn a certain percentage profit from the initial funds over a specific period. Meanwhile, the bond issuer, in this case, is the state, can obtain funds to finance the budget needed by the country.

The government has even guaranteed the regulations regarding the payment of interest and principal on bonds. These regulations are stated in Law Number 24 of 2002 and Law Number 19 of 2008. So, you don’t need to worry about profit payments when investing in government bonds.

Risks That Can Occur

Although bonds guarantee bondholders payment of funds right when they mature and have authority over the country's financial arrangements, this type of bond can still have risks.

The risk of late payment or default can occur during a national economic crisis, such as the monetary crisis of 1998. Even outside of a monetary crisis, risks can occur when you invest in foreign government bonds and the currency exchange rate weakens, causing the return on investment to be adjusted when the currency value decreases.

So, what do you think? Interested in investing in government bonds? If interested, consult with a financial expert first. Plan your finances as thoroughly as possible to ensure your financial condition remains safe.

Author: Nisa Maulan Shofa