Debt Instruments 2024: Why Are Investors Overlooking This "Safe" Asset?

Recently, the stock market has been fluctuating back and forth. Some people are afraid to invest, while others regret not doing so. Banks are paying fragile interest rates, gold has risen again and again, and when looking for other options, we find that debt securities—the ones less known than stocks—might be the answer many overlook. So, we’ve gathered clear information for you.

Debt Securities Are Not “Liabilities” of Ours, But “Contracts” with Value

Forget the word “debt” in the name, because debt securities where investors lend money to companies or governments are like signing a loan agreement. We lend the money, and others are obliged to repay the debt, compensating us with regular interest payments. When the maturity date arrives, they return the principal.

Therefore, if current interest rates are very low, debt securities offering higher returns than regular deposits become quite attractive.

What Risks Are Involved When Investing in Debt Securities?

The five basic risks from the start:

1. Default Risk – The company cannot repay the debt. Always check the issuer’s financial health beforehand.

2. Interest Rate Risk – When market interest rates rise, older securities with lower interest rates lose value.

3. Liquidity Risk – Not as easy to trade as stocks; you might have to wait a while.

4. Inflation Risk – If inflation exceeds the interest earned, real returns become negative.

5. Reinvestment Risk – When maturity arrives, you need to find a new place to invest the money. If the options are poor, you might be dissatisfied.

Beyond these, there are also “Embedded Options” (Embedded Option) to watch out for, such as early redemption by the issuer or conversion rights into shares, which can change the returns.

How Many Types of Debt Securities Are There?

From the issuer’s perspective, there are three types: government bonds (safest), state-owned enterprise bonds (fairly safe), and corporate bonds (offer good returns but with risks).

From the claim’s perspective: subordinated bonds vs. non-subordinated bonds (the first riskier but offers higher returns).

From the payment method: regular interest (standard), zero-coupon bonds (bought at a discount and redeemed at full face value), and also Fixed Rate (fixed interest) vs. Floating Rate (variable interest).

How to Calculate Returns (Simply)

Suppose you buy a bond worth 10,000 THB with an 8% annual interest rate, paid twice a year, for 4 years.

Each payment: 10,000 × (8% ÷ 2) = 400 THB
Per year: 800 THB
Total over 4 years: 3,200 THB
At maturity: you get back 13,200 THB.

It’s not complicated at all.

How to Buy: Primary Market vs. Secondary Market

Primary Market – Purchase directly from the company or government (through commercial banks as intermediaries). Must buy in a lump sum, fixed amount, with clear conditions.

Secondary Market (BEX) – Buy from previous holders via securities, similar to buying stocks. Prices are not fixed (may be more expensive if interest rates drop). Settlement T+2.

Is Investing in Debt Securities Worth It in 2024?

Main Advantages:

• Duration from 1 day up to 20 years. Anyone wanting their money to “turn over” can choose any period.
• Steady cash flow (regular payments, not just at sale).
• Higher returns than bank deposits.
• Lower risk than stocks (priority over shareholders in repayment).
• A secondary market exists, providing liquidity.

Debt Securities vs. Stocks: Who Wins?

Which to choose? It depends on you:

• If you are young and can accept risk → choose stocks.
• If you are older and prefer stability → choose debt securities.
• For the general public → mix 60% stocks + 40% debt securities (or any proportion) for a “comfortable sleep” with reasonable returns.

Summary

Debt securities are not tools that are “bullish” or “cool” like stocks, but they play an important role for those seeking balance, safety, and reasonable returns.

With the convenience of trading (via the BEX secondary market) and proper understanding of risks, every investor should consider them as part of a systematic investment approach, rather than letting money sit in a bank earning “zero” interest per month.