Debt Investments: Bonds

Money Monday on The Bridge: Investing in Bonds

I was fortunate enough to chat to media personality, Lerato Kganyago, on her radio show titled The Bridge on South Africas leading radio station, Metro FM. The topic at hand was “investing in bonds” and below is a summary of the 10 minute conversation:

Bonds are issued by companies to finance their business operations and by governments to fund budget expenses like infrastructure and social programs. A bond is a debt investment whereby you “borrow” an institution money and earn profits through interest. Bonds are ideal as they’re less riskier than shares and most investment products out there.

One can invest in bonds for as little as R1 000 and keep the investment for 2-5 years, potentially earning 7.25% upwards. The two main benefits of investing in bonds are:

  • You know when you’ll get your funds (this is known as an expiry date).
  • You will know how much you’ll be getting beforehand (pre-determined interest).

Once you’ve invested in bonds, you generally have 3 options of enjoying your profits, namely:

  1. reinvest the money in a period of 2, 3 or 5 years
  2. receive the interests semi annually
  3. receive the interest on a monthly basis

Always remember: the longer you keep the investment for the greater the chances of it growing (i.e: compound interest and time)

For any trading and investing related questions, please send them to my team info@bearruninvestments.co.za or info@nelisiwemasango.com

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