Buying government bonds is considered a safe investment, while investing in corporate bonds is profitable, but involves risks, said Tatyana Bunegina, owner of Bestate real estate investment agency. The financial adviser told Izvestia about the possibilities of such investments.
“A bond is a debt security, by buying which, the investor lends his money at interest to the person who issued it (the issuer). All bonds can be divided into three types: government (federal loan bonds or OFZ), municipal and corporate. You can earn on securities both on interest for the use of funds – this is called coupon income, and on buying and selling the bonds themselves, ”explained the expert.
Speaking about coupon income, she clarified that the purchase of government bonds is considered the most reliable investment with a guaranteed payment, but it is the least profitable: the interest on payments is lower than on corporate bonds. OFZ is issued for a period of 1 to 10 years, its yield depends on the rate of the Central Bank (CB) of the Russian Federation and averages from 6 to 14% per annum.
“Corporate bonds are issued by banks and private companies, the payments on them are up to 20% per annum. It is more profitable to invest in such securities, but it is associated with risks, including the bankruptcy of the issuing company and the loss of invested funds. To save your investment, it is recommended to choose a reliable company that maintains a stable position in the market. However, even here, the larger the company, the more liquid its securities, the lower will be the annual income from its bonds,” Bunegina said.
She also noted that securities can be with a fixed or floating coupon. According to her, in the second case, the profitability depends on the level of inflation or any rate, for example, the key rate of the Central Bank.
“There are also subordinated or “junior” bonds, the payments on which, in the event of the issuer’s bankruptcy, will be made if cash remains after the payments on the “senior” bonds. To minimize risks, it is recommended to make a diversified bond portfolio – invest in different companies,” the financial adviser added.
Bunegina said that the value of securities varies depending on supply and demand, as well as rates in the banking system (the key rate of the Central Bank, rates on deposits and loans).
“The higher the rates and the lower the demand, the lower the value of the bond – it can be bought to sell at a higher price in the future when rates rise and / or demand increases. However, liquidity risks must be taken into account here, when a bond cannot be sold at a profitable price due to political, economic or other unforeseen events,” the expert concluded.