Should I Invest in Bonds in 2024? 🤔

Let's break down the world of bonds…not in the spy world, but in the stock market. From safety features to potential benefits, discover whether bonds are the right move for you

What are bonds?
Think of bonds as loans you give to governments or companies. In return, they pay you interest regularly and return your initial investment when the agreed time is up. Unlike stocks, bonds are like a fixed deal: they have a set interest rate, a due date, and their value depends on interest rates.

How are bonds related to interest rates?
Here's the key trick: when interest rates go up, the price of existing bonds tends to go down. When rates drop, bond prices rise. This relationship is crucial to understand because it affects how much your bonds are worth. Keep an eye on interest rate trends to avoid potential losses.

Is investing in bonds safe?
Bonds are considered a safe bet. When you buy a bond, you're basically lending money. Government bonds, in particular, are extra safe because they are backed by the government, making the chance of not getting your money back very low. This safety feature is great for folks who want to be cautious with their investments, need more predictable cashflows and lower volatility.

What are the benefits of investing in bonds?

The EasyEquities platform currently has five government bonds available:

1. R186, December 2026 maturity, 10.5% annual coupon
2. R2030, January 2030 maturity, 8% annual coupon
3. R2035, February 2035 maturity, 8.875% annual coupon
4. R2040, January 2040 maturity, 9% annual coupon
5. R2048, February 2048 maturity, 8.75% annual coupon

This offering represents specific points on the South African bond curve, ranging from maturities of 3 years to 25 years. These different maturities naturally offer different yields to maturity, and these range from 8.80% for the short dated bond up to 12.30% for the long dated bond.

You see, bonds are not that all complicated. It just takes a little bit of understanding and a lot of patience.

To know more about bonds, check our FAQs here. To further understand how SA government bond coupons and tax implicatons work, know more here.

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