Friday, September 30, 2005
Schroder is offering government bond FR004 with estimated yield per annum of 10 to 11.5% net. It’s called Schroder Fixed Maturity Plan (SFMP). Is it an interesting invesment? In my opinion, it’s not. Why?
First, nowadays banks in Indonesia are offering interest of 10.5% p.a with 20% tax deducted from the interest. Roughly, it’s about 8.5% net. Certain banks also offer incentive of 1.5% p.a net. So 8.5% + 1.5% is equal to 10%. Risk free and guaranted. SFMP’s yield depends on the market. It could be less than estimated yield calculated by Schroder. Besides, it carries risk of default.
Second, FR004 is no longer cheap. Its value is 2% higher than its price whereas a month ago, just a month ago when goverments bonds dropped due to massive redemption of mutual funds, FR004 reached 6% lower.
Then, what is interesting for investing now? I don’t know. It depends on your risk profile. Are you on a risk taker category or are you on a risk averse category?
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First, nowadays banks in Indonesia are offering interest of 10.5% p.a with 20% tax deducted from the interest. Roughly, it’s about 8.5% net. Certain banks also offer incentive of 1.5% p.a net. So 8.5% + 1.5% is equal to 10%. Risk free and guaranted. SFMP’s yield depends on the market. It could be less than estimated yield calculated by Schroder. Besides, it carries risk of default.
Second, FR004 is no longer cheap. Its value is 2% higher than its price whereas a month ago, just a month ago when goverments bonds dropped due to massive redemption of mutual funds, FR004 reached 6% lower.
Then, what is interesting for investing now? I don’t know. It depends on your risk profile. Are you on a risk taker category or are you on a risk averse category?
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