Millennials Tendency to Choose SBR as the Investment Instrument

Millennials, as those who are 18 to 37 years old mostly putting all of their investment into stocks, stock mutual funds or Saving Bond Retail (SBR). The Ministry of Finance of the Republic of Indonesia has just launched its fifth series of Saving Bond Retail in February. Have you ever known about the investment instrument SBR?

SBR is a new and safe retail bond issued by the the Directorate General of Financing and Risk Management of the Ministry of Finance (DJPPR). It is debt instrument whereby an investor effectively is loaning money to the issuer (in this case is government) in exchange for periodic interest payments plus the return of the bond’s face amount when the bond matures. SBR can be purchased as new offerings or on the secondary market, just like stocks. The value can rise and fall based on a number of factors, the most important being the direction of interest rates.

There are several advantages of SBR, there is no risk of falling interest rates, also facility early redemption funds that are faster before maturity. The minimum value of SBR orders has been lowered from the original IDR 5 million for the first series in 2014, into only IDR 1 million, very affordable right? Best of all, your money is safe as it is backed by government. In addition, by having SBR gives you chance to participate and support the financing of national development.

The only real downside is that once you have bought your bond you must wait for it to mature, so liquidity is not one of its features. In this regard, a money-market account might be preferable if you require more flexibility but bear in mind that returns on your bond will be higher. So if you can wait for your money, then you can reap the benefits of the saving.

The level of SBR interest rates will be adjusted by changes in interest rate of Bank Indonesia or Reverse Repo Rate 7-Day BI with the current SBR 005 offered at the level of 8.15%. If the BI interest rate falls, the SBR interest rate will remain the same at the level of 8.15%, but if BI raises the interest rate, for example 25 basis points, then the SBR interest rate will rise to 8.40%.

Though it’s very good return, you must remember there is tax deduction of 15% in SBR interest, but this tax remains smaller than the deposit of 20%. If you invest in retail bonds there are no charges, commissions or other costs that eat into your capital and you only need a minimum of IDR 1 million to purchase a bond. Your investment portfolio may be increased at any time by buying more retail bonds. Unfortunately, you can’t invest more than IDR 3 billion in them.

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Agnes Grace

Postgraduate Student at Executive MBA – ITB

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Agnes Grace

Postgraduate Student at Executive MBA - ITB