Asked by Anonymous
Updated on 04 May 2019
Trying to build my investment portfolio currently investing in mutual funds. Not quite sure whether I should be investing in bonds too? If so, what type of bonds if I’m looking to be invested in a long time horizon about 20 years
Top Contributor (May)
Always a good to have to provide some negative correlation with your equity holdings. If you're already investing in funds, you can look to invest in investment grade or high quality bond funds to complement your portfolio.
Other than SSBs, buying individual bonds will require a high quantum and you'll be exposing yourself to concentration risk on just a few bonds.
So buy a fund instead to hold hundreds to thousands of bonds.
People invest in bonds because of the stability in terms of the coupon pay out and less fluctuations
Usually these bonds need a large amount of capital
If you want to diversify at a lower capital then consider SSB or bond etfs
Bonds can be a part of your investment portfolio as they are less volatile than equities. There are government bonds, corporate bonds and high-yield bonds. However, you can consider the CPF Special Account as similar to government bonds. Therefore, you should only consider corporate bonds or high-yield bonds as part of an overall investment portfolio.
For long term bonds interest rate risk and reinvestment risk should be considered. U need to have a view on how interest rates will move in next 20 years.
CPF SA 4%
Bonds should be the safe part of ur investment, besides emergency funds that will remain as cash. I have always topped up my SA yearly till it reached FRS recently before i even look at the recent bond issues.