In a country with low financial risk, government bonds represent an excellent investment in terms of security and liquidity but not in return.The financial system tends to suggest that investing in government bonds today would represent a high risk. Greece aside, one of the highest in Europe. Government bonds from other countries such as Germany and France are far less risky, even if in return for extremely low yields.
In short, they present government bonds as a high-risk investment, only to then recommend investments that are much riskier for savers but more profitable for the banking system.
Ready Against Term (PCT)
They are contracts with which you buy securities from a bank (government bonds and non-convertible bonds, but increasingly also bonds from the issuing institution). The bank undertakes to repurchase them at maturity (maximum duration generally 1 year) at a higher price, thus fixing the yield. Early extinction is not allowed: anyone who wants to resell securities in advance must pay a penalty. PCT’s financial operation is like a bank loan. It could be an alternative to checking accounts and government bonds, but with a degree of risk.
Bonds are one of the main investment instruments. A bond is a bearer debt security. By purchasing it, the investor lends money to the issuing company or entity, which undertakes to return principal and interest on the expiry date specified in the contract and / or on the scheduled maturities (coupons). Bonds can be listed on the stock exchange. As with government bonds, higher returns always correspond to greater risk.
There are many types of bonds in circulation, among the most common on the market:
issue at a certain price, fixed or variable periodic coupon, quotation on the main stock markets. These are the classic bonds that have always existed and through which the investor buys a security at a certain price. Upon repayment, it will collect the repayment value and, during the duration of the investment, it will receive the coupon amount as interest accrued on the investment.
the repayment value of the bonds without coupon (zero-coupon) is equal to 100; the purchase cost at issue, in proportion to the effective yield at maturity, is necessarily less than 100, or “below par”. The percentage return of zero-coupon bonds is calculated by detecting the difference between the capital invested and obtained on maturity. If the purchase price were equal to 90, the interest actually received, gross of taxes and bank commissions, would be: repayment – investment (100-90) / investment (90), therefore 10/90 = 0.11, i.e. 11%.
the convertible bonds allow the subscriber to obtain a repayment of the invested capital at the due date or at set dates. The price at which shares can be purchased is set at the time of issue. For the entire duration of the obligation, the buyer will normally receive a coupon for an amount lower on average than that of a normal debt security. Savers obtain an instrument with a lower return than a bond with similar return and risk characteristics. However, this allows entering the stock markets only if the performance of the selected securities is positive, thus minimizing the risks associated with the volatility of the markets.
Structured bonds (the best known are the INDEX LINKED) are investment instruments consisting of a part of the debt and an additional financial element, which almost always negatively binds the performance to the performance of external factors. These products offer high returns but very rarely and only when specific conditions occur: a real gamble. Normally the structure at the base of the title is incomprehensible for the saver who subscribes without the necessary explanations that, if known, would have dissuaded him. They are mainly issued by banks and lenders (but what a combination!), To collect money or to transfer your business risk to others.