Do you really trust the bank or the government NOT to get sticky fingers?
There is a story somewhere floating around about bonds (maybe it was Dan who shared the story) and long story short, the bonds were worthless.
Well, I never say there is no sticky fingers propensity. Like I and other people have said many of the largest graft cases in Indonesia are involving bankers, or the like. I do not think the banks as institutions themselves; however the history has shown, it could be individuals, people working in the banking industries colluding with other parties. If the law makers, police, the prosecutors, judges are colluding what left for justice ?
The good examples are: ASABRI, Jiwasraya, Century Bank, Bali Bank, Jamsostek, or the most recent one Indosurya (recent judgement). In the past similar cases to Indosurya involving cooperative initiative, involving illegal bankers such as Koperasi Langit Biru KLB IDR6T, Koperasi Cipaganti IDR 3.2T, Koperasi Pandawa IDR 3.3T. All of these mega graft cases are involving bankers or the like such as illegal bankers using Cooperative Initiative colluding with other parties.
In Indonesia, there is IDR2b guaranteed by LPS but people might be more creative in syphoning those money instead of using the deposit guaranteed scheme to pay the depositors. The things like the victims of ponzi pyramid scheme Binary trading, Robo trading who are offered legos, cryptos or it could be bogus investment that have very little value (if any). But considering it is only IDR2b guaranteed there are always money available to pay back. But political and corruption risk could come into equation where those money resting in LPS which supposed to pay back to the depositors could be diverted to other means. But that risk might be smaller than the previous cases. Even there is not enough money left in LPS, the indonesian government will be thinking twice not to pay their obligation considering international community, the institutional lenders, international credit rating agencies are watching and might get involved. These might lead to the unrepairable reputational damage.
Regarding bonds, if it is treasury Bonds, Gilts issued in the developed world, the chance it will be worthless is extremely small. Unless those countries cease to exist or become failed states. They offer lower return than equity but more secure and less volatile. That is why some people especially those who who want to minimise the risk (apart from inflationary risk) still invest in it.
If it is held until maturity you will always get at least the face value of those bonds. But I personally prefer a high risk high reward play, so never have interest in investing in Bonds. I prefer to put it into sort term saving waiting allocation to equity. The major risk of Treasury Bonds, Gilts are inflationary risk. The purchasing power of your money will worth less in ten years (say).
This is a pro and Contra about investing in bonds
A government bond is issued at the federal, state, or local level to raise debt capital for various reasons, including infrastructure, healthcare, debt, and social programs..
www.investopedia.com
www.indonesia-investments.com
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