27 Oct 2019
I have friends who put in $500/$1,000 in bonds every month. But I’m wondering why do people choose to buy bonds when the interest rate is on average 2-2.3% for a 10-year commitment.
You can beat/get similar to this interest rate without 10 years of commitment with high-interest rate savings account/some FD/ endowment plans?
I’m trying to think of reasons why people still chose SSB.
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27 Oct 2019
Backoffice technical at financial services firm
One potential advantage is that the bonds are 'fixed interest' so the 2.x% is payable throughout the 10 year (in your example) commitment.
For the rates on savings accounts/FD - they are non guaranteed so if the economic environment changes, the rates could be lower in future and total interest less than the bonds.
For endowments, assuming issued by an insurance company, they are guaranteed as well so comparable and any difference of yield should be attributable to credit/liquidity risk.
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