How to Buy Bonds Safely and Profitably? Practical Guide for Vietnamese Investors

What Are Bonds? Why Are They Attractive?

In the world of financial investment, besides stocks, buying bonds is a path chosen by many investors due to its higher safety. Not everyone has the courage to accept the risks of stocks; for those with idle capital, bonds provide peace of mind and stable income.

According to market data, from 2016 to 2020, the Vietnamese corporate bond market grew an average of 35% per year. This figure shows the significant appeal of this investment channel. However, many people still do not fully understand this type of security, especially the question “should I invest in bonds or stocks?”

Simple definition: Bonds are a type of debt security issued by organizations such as (state agencies, banks, and enterprises). Buyers of bonds become creditors to the issuer. Periodically, they will receive the agreed interest rate and eventually get back the principal.

Three Main Features of Bonds

1. Have a specific maturity date and fixed interest rate – Unlike perpetual stocks, bonds always have a defined maturity date.

2. Diverse issuance formats – Can be in the form of certificates, book entries, or electronic data.

3. Combine three factors: yield, risk, and liquidity.

Two Popular Types of Bonds in Vietnam

Government Bonds vs. Corporate Bonds

Common point: Both are debt certificates, offering higher interest than savings, with minimum terms of 1 year, and can be exchanged/transferable.

Conditions to Buy Bonds in Vietnam

To buy bonds, you only need an account at a securities company in Vietnam. Companies like VPS, MBS, Vndirect, SSI provide this service. The process is simple, taking only a few minutes to open an account.

Bond Classification: For Better Understanding

According to Issuer Source

• Corporate bonds: Issued by LLCs or joint-stock companies to raise capital.
• Government bonds: Issued by the state to mobilize idle funds of citizens.
• Bank bonds: Issued by financial institutions to increase operational capital.

According to Yield

• Fixed interest: Yield is determined by a fixed percentage.
• Floating interest: Yield varies over periods and is based on fluctuating interest rates.
• Zero interest: Buyers do not receive interest but buy at below face value.

According to Security Level

• Secured bonds: The issuer uses valuable assets as collateral; in case of default, you have the right to seize assets.
• Unsecured bonds: No collateral.

According to Form

• Bearer: No name of the buyer recorded.
• Registered: Name of the buyer recorded in the books.

According to Nature

• Convertible: Can be converted into company stocks.
• With purchase rights: Comes with rights to buy stocks.
• Callable: The issuer has the right to buy back at maturity.

Bonds vs. Stocks – Which One to Choose?

Remarks: Bonds are suitable for conservative investors, while foreign stocks attract young investors seeking dual-direction profits with small capital.

Two Ways to Buy Bonds in Vietnam

Method 1: Direct Investment

3-step process:

1. Sign a bond purchase contract with the issuer.
2. Transfer money within the specified time, receive ownership certificate.
3. Receive interest at maturity.

Important costs:

• Personal income tax
• Transfer fees (contracts, printing certificates, etc.)
• Money transfer fees

Where to do it: Directly at the issuer or through securities companies.

Method 2: Investment via Funds

3-step process:

1. Open a trading account and register to buy fund certificates.
2. Place buy/sell orders according to each fund’s regulations.
3. Hold or trade as needed.

Important costs:

• Personal income tax
• Transfer fees when buying/selling
• Fund management fees
• Penalties for early sale

Where to do it: Bond investment funds.

Important Terms When Buying Bonds

Criteria for Choosing Suitable Bonds

When buying bonds, consider the following factors:

✓ Issuer’s reputation: Prioritize government, large banks, and reputable companies with transparent information.

✓ For enterprises: Choose leading companies with good competitive advantages and stable growth.

✓ Financial situation: Select organizations with transparent and healthy finances.

✓ Management team: Look for trustworthy leadership focused on traditional business activities.

✓ Collateral assets: Prefer bonds with asset guarantees.

✓ Auditing: Choose companies audited by major auditing firms.

Frequently Asked Questions

1. Which bonds should I buy?

Choice depends on your market assessment ability. If you prefer safety, government bonds are a good choice with fixed interest and almost absolute capital preservation. Corporate bonds are more flexible but carry higher risks.

2. Is investing in bank bonds safe?

Very safe. Bank bonds are a tool for banks to raise capital, highly secure, reputable, and closely monitored. Choose large banks.

3. Should I invest in bonds or stocks?

Both are attractive but in different ways. Bonds are safer, stocks offer higher profits. If you are a new investor with small capital and want quick gains, consider carefully before deciding.

4. How much money do I need to invest in bonds?

Direct investment: about 100 million VND. Via funds: 5-10 million VND, lower than direct investment.

5. What are the main risks when buying bonds?

• Credit risk (default): The issuer fails to pay interest/principal at maturity.
• Early repayment risk: Bonds are repaid earlier than expected, interest rates decrease.
• Interest rate risk: Fluctuations in interest rates differ from expectations.

Conclusion

The bond market is complex, especially for beginners. To succeed in buying bonds in Vietnam, you need to understand key terms, basic calculation indices, and carefully evaluate risks.

The minimum term of 1 year makes bonds less attractive to young investors seeking short-term trading. However, with long-term investment plans and the need for stable income, bonds remain an attractive financial channel.

We hope this knowledge helps you make reasonable investment decisions for yourself. Wishing you success!