## From Bank Fixed Deposits to Yield Optimization: A Beginner's Guide to Bond Investing in 2567

In today's investment environment, where should funds be allocated? The stock market is too volatile, making it hard to feel secure; gold seems to have missed the boat; and bank fixed deposits offer such low interest that it's disappointing. At this crossroads, many people are turning their attention to a long-overlooked investment vehicle—the bond market.

Honestly, bond investing has long been considered a "niche" by many. But if you think carefully, this choice actually hides quite a few secrets. It can provide you with stable cash flow without the sleepless nights that stocks sometimes bring. Today, let's have a good chat about this topic.

## What Exactly Are Bonds?

The simplest way to describe bonds is: they are IOUs. When you buy a bond, you become a creditor, and the issuer (which could be the government, a corporation, or a public institution) owes you money.

How does it work specifically? Suppose you spend 10,000 yuan to buy a bond, and the issuer promises to pay you 8% interest annually, paid in two installments, with the principal and interest fully repaid after five years. This means you will receive 400 yuan in interest every six months, totaling 4,000 yuan over five years. This is the basic logic of bond investment.

But don’t be naive—although bond investing appears safe, risks are objectively present. The main risks to watch out for include:

### The Five Hidden Dangers of Bond Investing

**Credit Default Risk** — If you happen to buy bonds issued by a company with poor financial health, when the repayment date arrives, they may not be able to pay back in full or only partially. This is the most direct "big loss" scenario.

**Interest Rate Fluctuation Risk** — As the economic environment changes, interest rates will adjust accordingly. Fixed-rate bonds you hold may depreciate as market interest rates rise. Especially when new bonds are issued with higher interest, your bonds become less attractive.

**Liquidity Risk** — Bonds are not traded 24/7 like stocks. Want to sell your bonds quickly? It might be troublesome, or you may not find a buyer at all.

**Inflation Erosion Risk** — Even if you receive principal and interest on time, if inflation exceeds your yield, your real purchasing power is shrinking. This risk is often overlooked.

**Reinvestment Risk** — When bonds mature and you receive the principal and interest, if there are no good investment options available, you might have to leave the money idle or invest in lower-yield projects. This is an invisible loss.

Additionally, many bonds come with some "hidden rights" (a professional term called embedded options), mainly three types:

- **Issuer Call Option**: The issuer can redeem the bond early, which may cut short your interest earnings plan.
- **Investor Put Option**: Conversely, you can choose to sell the bond back to the issuer before maturity.
- **Conversion Rights**: These bonds can be converted into company stock; if the stock performs well, this is a bonus.

## Diversity in the Bond Market

According to the classification by the Thailand Securities Exchange (SET), the currently circulating bonds roughly fall into five main types:

### By Issuer Category

**Government Bonds** — Issued by the government or government agencies, with the lowest default risk and relatively conservative interest yields. It’s like buying the safest financial product.

**Public Institution Bonds** — Issued by state-owned enterprises or affiliated government units, not directly guaranteed by the Ministry of Finance but still creditworthy.

**Corporate Bonds** — Issued by private enterprises, with risk and return varying greatly depending on the company. Good companies can offer attractive interest, while poor ones may lead to losses.

### By Priority Level

**Senior Bonds** — In case of bankruptcy, holders of these bonds are paid first.

**Subordinated Bonds** — Paid after senior bonds.

### By Collateral

**Secured Bonds** — Backed by physical assets or collateral.

**Unsecured Bonds** — Rely solely on the creditworthiness of the issuer.

### By Interest Payment Method

**Periodic Interest Bonds** — Pay interest regularly, such as semi-annually or annually.

**Discount Bonds** — Do not pay interest but are sold below face value; at maturity, they are redeemed at face value, with the difference being your yield.

**Zero-Coupon Bonds** — Neither pay interest nor are discounted; instead, they are issued at a discount and pay the full amount at maturity.

### By Interest Rate Type

**Fixed-Rate Bonds** — Interest remains unchanged throughout.

**Floating-Rate Bonds** — Interest fluctuates with market benchmark rates.

## How to Make Money from Bonds?

Many people think bond yields are too low, but this actually reflects the balance between risk and return. Calculating bond returns isn’t complicated. Using the earlier example of 10,000 yuan, 8% annual interest, 5-year term, paid semi-annually:

Interest per payment = 10,000 × (8% ÷ 2) = 400 yuan
Annual interest = 400 × 2 = 800 yuan
Total over 5 years = 800 × 5 = 4,000 yuan
Total principal and interest = 14,000 yuan

It doesn’t seem particularly impressive, but compared to bank deposits, this yield is quite good.

### Two Markets for Bond Trading

**Primary Market (New Issue Market)** — Buying bonds directly from the issuer or through financial intermediaries. You need to understand all details like maturity, interest rate, redemption terms, etc. This step is crucial; poor choices here are like stepping into a trap from the start.

**Secondary Market (Circulation Market)** — In Thailand called BEX (Bond Electronic Trading System), investors can trade existing bonds with each other just like stocks. Settlement cycle is T+2 (settled within two working days after trade). Bonds are also stored at the Thailand Central Depository (TSD), so you don’t need to physically hold paper bonds.

## Is Investing in Bonds in 2567 a Good Idea?

In recent years, more and more people are paying attention to bonds, and not without reason. The advantages of bond investing are indeed worth noting:

**Flexible Maturity Options** — From one day to twenty years, you can choose freely based on your financial planning. Need short-term liquidity? One-year bonds will do. Planning for long-term retirement? Twenty-year bonds are available.

**Stable Cash Flow** — Especially with installment-paying bonds, you receive regular income. For retirees or those needing steady cash flow, this feature is very valuable.

**Better Returns than Fixed Deposits** — Bond interest rates are generally higher than bank fixed deposits, which is an undisputed fact. Especially in the current low-interest environment, this advantage is even more apparent.

**More Reasonable Risk Tiers** — Compared to stocks’ wild swings, bonds are much more moderate, with volatility roughly one-third of stocks.

**Decent Liquidity** — Although not as hot as the stock market, the BEX secondary market’s trading volume is enough to meet most investors’ buying and selling needs.

## Bonds vs. Stocks: Which Is More Suitable for You?

This isn’t a choose-one-or-the-other question; it depends on your situation.

### Core Differences

| Dimension | Bonds | Stocks |
|------------|--------|--------|
| Yield Potential | Fixed and predictable | High but volatile |
| Risk Level | Relatively low | Relatively high |
| Volatility Character | Gentle and stable | Intense fluctuations |
| Focus of Analysis | Debt repayment ability | Profit growth |

### How to Choose?

**If you are young, have stable employment, and can tolerate short-term paper losses** — stocks are a better choice. Over the long term, the power of compound interest in stocks will make your wealth grow faster.

**If you are nearing retirement, have low risk tolerance, and seek stable cash flow** — bonds are the main player. Protecting principal and ensuring steady income are more important than high returns.

**If you are a rational middle-ground investor** — a combination of stocks and bonds. This way, you can share in economic growth’s dividends while using bonds’ stability to hedge stock risks. During market volatility, this allocation can keep your overall portfolio relatively stable.

## Final Words

The bond market is becoming an increasingly popular choice among investors, not because it’s particularly glamorous or can make you rich overnight, but because it acts as a "stabilizer" in your investment portfolio. In the current environment of rising global economic uncertainty, this stability is especially valuable.

The key is to understand the essence of bonds, recognize their risks, and make decisions based on your life stage and risk appetite. Bonds won’t make you rich overnight, but they can make your investments more rational and composed. For most ordinary investors, that’s already enough.