x

Start investing with a
free Kristal.AI account.

icon

Simple. Secure.

*Error message

Kristal Insights5 Mins Read

Bonds vs Bond ETFs – What are the differences and benefits?

What are Bonds?

Bonds are debt securities usually issued to raise money from investors willing to lend their money for a specified period of time. Issuing bonds is a common method for entities to raise funds, whether it is a government, corporation or municipality. 

When you purchase a bond, you are “lending” to the bond issuer or “borrower”. In return, the borrower promises to pay you a specified rate of interest over the life of the bond and to repay the principal amount, otherwise termed as the “face value”.

There are a few different types of bonds, but the main ones are:

  1. Corporate bonds – issued by private and public corporations. 
  2. Municipal bonds – issued by states, cities, counties and other government entities.
  3. Treasury bonds – issued by the U.S. Department of the treasury on behalf of the federal government.

Why invest in bonds?

People tend to prefer buying bonds as they provide a predictable income stream. Bonds typically pay interest twice a year. They are typically regarded as a safe haven for one’s money.

When bonds are held to maturity, bondholders are able to get back the entire principal, hence it is a good way to preserve capital while investing. It can also act as an offset exposure to more volatile stock holdings.

Bonds are able to contribute an element of stability to almost any diversified portfolio, acting as a safe and conservative investment. When stocks perform poorly, they are great savings vehicles for when you want to preserve your capital.

What are some benefits of investing in bonds?

  1. Capital preservation
  2. Earning predictable returns – can function as steady streams of income

Difference between Bonds and Bond ETFs? 

While Bonds constitute single security with a Corporate, Financial Institution, or Government as a borrower, ETFs invest in a basket of bonds or debt instruments. They pool funds from capital invested, often tracking an index of bonds with the main objective of matching the returns from that underlying index.

While both have similar attributes, a Bond ETF typically offers better risk-adjusted returns at a lower cost compared to buying individual Bonds. Bond ETFs also allow for a smaller investment size for investors who wish to construct and own a diversified portfolio of bonds.

Another difference is that Bonds have a fixed maturity date and coupon, while a Bond ETF does not have a maturity date but often pays dividends that mirror the received coupons in the strategy, or re-invest those proceeds at the prevailing market price. 

Advantages of Owning Bond ETFs over Bonds

Disadvantages of Owning Bond ETFs over Bonds

When charted against equity indices such as the Straits Times Index, the price action for the ABF Singapore Bond Index Fund and Nikko AM SGD Investment Grade Corporate Bond ETF has been relatively more stable.

ABF Singapore Bond Index Fund (stock code: A35)

The ABF Singapore Bond Index Fund is the first ETF bond fund listed in Singapore, which invests in the constituents of the iBoxx ABF Singapore Bond Index. This index tracks a basket of high-quality bonds issued primarily by the Singapore government and quasi-Singapore government entities.

The Fund boasts a 16-year track record in demonstrated resilience and performed well even during volatile market conditions for over a decade. This performance can be attributed to the fact that is an investment in Singapore government bonds, which is one of the world’s highest-yielding AAA-rated government bonds. It is commonly perceived as a safe haven for assets.

SGD Investment Grade Corporate Bond ETF(stock code: MBH)

The Nikko AM SGD Investment Grade Corporate Bond ETF is the first to offer investors easy access to Singapore Dollar-denominated, investment-grade corporate bonds in affordable units. The Fund aims to replicate the performance of the iBoxx SGD Non-Sovereigns Large Cap Investment Grade Index, allowing investors to diversify their portfolios with corporate bonds from high-quality issuers.

Since 2012, Singapore Corporate Bonds have provided better returns compared to Singapore Government Bonds and more stable returns versus Singapore equities. The fund still channels focus on the big names to invests in – HDB, LTA, UOB, NTUC (top 10 holdings source: Nikko Asset Management Asia as of 31 Dec 2020).

 

Disclaimer

The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

Other stories you might like

cross
Change your country to India?

You’re now visiting Kristal.AI Worldwide.
To explore diverse offerings in Indian and global products, select India as your country.

ind

India

hkg

Hong Kong

sgp

Singapore

global

Other
Accredited Investor Declaration

This is offered only to Accredited and Institutional Investors as defined under the Securities and Futures Act, Chapter 289 of Singapore (“Act”), which broadly comprises of regulated financial Institutions, large corporates, high net worth individuals and sophisticated investors.

An Accredited Investor is an individual
  • Whose net personal assets exceed in value SGD 2 million (or it’s equivalent in a foreign currency) with value of his/her primary residence capped at SGD 1 million, or
  • Whose financial assets (net of any related liabilities) exceed in value SGD 1 million (or it’s equivalent in a foreign currency), or
  • Whose income in the preceding 12 months is not less than SGD 300,000 (or it’s equivalent in a foreign currency)

I agree to opt-in as Accredited Investor and will submit required documentation to confirm the same.

< Back Proceed as Private Wealth

Wealth Management Solutions
Accredited Investor Declaration

This is offered only to Accredited and Institutional Investors as defined under the Securities and Futures Act, Chapter 289 of Singapore (“Act”), which broadly comprises of regulated financial Institutions, large corporates, high net worth individuals and sophisticated investors.

An Accredited Investor is an individual
  • Whose net personal assets exceed in value SGD 2 million (or it’s equivalent in a foreign currency) with value of his/her primary residence capped at SGD 1 million, or
  • Whose financial assets (net of any related liabilities) exceed in value SGD 1 million (or it’s equivalent in a foreign currency), or
  • Whose income in the preceding 12 months is not less than SGD 300,000 (or it’s equivalent in a foreign currency)

I agree to opt-in as Accredited Investor and will submit required documentation to confirm the same.

Proceed as Private Wealth

KRISTAL PRIVATE MARKET

Easy access to high-potential startups and private companies to diversify and enhance your portfolio.

For investors who want to support innovative businesses and be part of their success stories.

*The range of private investment opportunities will be made accessible post signup.

OVERVIEW

Explore and Identify

Select from a range of expertly curated Pre-IPO deals from across the globe

Efficient Execution

Enabling easy exposure as Kristal.AI takes care of the paperwork involved with a private investment

Only the Best

A ready-made collection of unicorn companies who are challenging incumbents and rewriting the rules of their industry

Success Story

Diversify your portfolio and be part of the success story of a dynamic and rapidly growing unicorn

Contact our Relationship Manager
ALTERNATIVE INVESTMENTS

Diversify your portfolio with exclusive Private Equity, Pre-IPO deals, VC Funds & other investments like Bitcoin, Gold, Hedge Funds and many more.

Kristal fractionalizes difficult-to-access deals and opportunities.

View Alternative Investments

OVERVIEW

Instant Access

A wide range of alternative asset classes such as Gold, Bitcoins, Hedge Funds and many more; readily made available

Risk Management

Enables investments in diversified assets hence spreading the risk

Easy Tracking

Enables you to get a consolidated view of investments in all assets at one place, hence facilitating easy monitoring and tracking

Exclusive Deals

Access to exclusive Venture Capitalist, Startup as well as pre-IPO investment opportunities

Low Investment Tickets

Facilitates fractionalization of investments in deals

Contact our Relationship Manager
FUNDS PLATFORM

Professionally managed funds with active investment strategies, screened for you by our investment committee to diversify your portfolio.

Enabling clients to access exclusive investment strategies.

View Funds

OVERVIEW

Access

Provides Access to Professional Fund Managers

Low Investment Tickets

Facilitates fractionalization of investments in funds

Diversity

A wide spectrum of investment strategies ranging from Arbitrage to Credit to Hedge Funds and many more

Fees

No additional costs are charged by Kristal.AI

Exceptional Performance

Funds with an impressive track record and potential for high profitability

Leverage

Benefits from insights of the expert selection and advisory team

Easy Management

No time consuming management of portfolios

Contact our Relationship Manager
TAILOR-MADE PRODUCTS

Customize products based on your market outlook and specific needs across equities, bonds, gold and more.

For investors looking to enhance portfolio yield based on market views.

*The range of Tailor Made Products will be made accessible, post login

OVERVIEW

Enhanced Earnings

Structures with potential to enhance portfolio yield based on market movements

Customization

Product features can be designed to articulate investor views

Fees

A flat and transparent fee structure like nowhere else

One-Click Access

A single feature ‘Ideas’ enables you to access recently launched and trending market opportunities

Contact our Relationship Manager
BUILD YOUR OWN KRISTAL

Can’t find what you are looking for? Create your own exclusive investment strategy with risk management & periodic reporting.

For seasoned investors who prefer to design their own portfolio.

OVERVIEW

Empowered Investing

Enables clients to create their own custom portfolio based on their unique needs

Unlimited Choice

Access to all possible exchange traded assets

Flexible Management

Flexibility in delegating the portfolio management role to us or actively taking up the day to day investment decisions, in your custom Kristal

Custom Fee Structure

A simple, transparent and a customized fee structure

Access to Expertise

Custom performance reporting as well as advisory support

Contact our Relationship Manager