Investment bonds from Sberbank are instruments accessible to individuals with varying budget sizes. These securities are traded on the Moscow Exchange and are often compared to options or structured notes. But how many similarities do these instruments truly possess?
What makes bonds appealing to the individual investor?
To navigate the potential pitfalls of investing in Sberbank's securities, we seek insights from experienced investor Sergey Tereshkin, founder of Oil Resource Group. A detailed examination of the businessman’s activities is available on his website: www.sergeytereshkin.ru
Features of Sberbank Bonds
Sberbank first introduced exchange-traded structured bonds to the market just before 2017, branding them as IOS. These securities were aimed at attracting investors and raising additional capital.
The yield of these securities is linked to specific parameters, including:
- exchange rate of the national currency;
- indices;
- product quotes;
- interest rates, etc.
Upon redemption at the end of the term, investors are guaranteed the repayment of the securities' cost. This means one can preserve capital while also earning a return, the magnitude of which may vary significantly based on the conditions outlined in the respective contract.
Investors may opt to terminate the contractual obligations prematurely; however, interest payments are not to be expected. In this scenario, investors can only claim the nominal value of the securities. Yet, this is not always guaranteed. Bonds are sold at market prices; if there has been a decline since the time of acquisition, the investor will receive only the current market price of the securities.
Furthermore, the fixed coupon payments are predetermined, while the conditional coupon tied to additional profits is influenced by various factors.
Currently, the total volume of Sberbank bonds amounts to 60 billion rubles. The initial payout period was capped at six months, and the nominal value starts from 1,000 rubles, with maturities that can extend to three years or more.
According to information from the bank's official website, the bond yield exceeds 7% annually, and under favorable circumstances with strengthened national currency, profits could exceed 20% per annum. This is significantly more advantageous than placing funds in a deposit account.
Potential investors have the option to choose from several different investment plans, which can be reviewed on the bank's official website.
Advantages of Investing in Sberbank Bonds
Sergey Tereshkin has meticulously analyzed online information presented by those who have experienced all the "pleasures" of this instrument and has identified its strengths and weaknesses, incorporating his personal analysis as well.
Thus, the advantages of investing in Sberbank bonds include:
- Safety. The issuer of these securities is a subsidiary of a state financial institution, which is the largest in the country.
- Variety. The bank offers several options for acquiring bonds, and the range of underlying assets may be of interest to the investor.
- Taxes. Clients face no difficulties with tax payments as the bank covers all additional expenses, ensuring that the investor retains all gains.
Securities can be purchased not only on the Moscow Exchange but also via an Individual Investment Account (IIS).
By meeting the payment conditions, investors can receive returns of up to 22% annually, with minimal capital risk. This means that individuals can confidently preserve their invested funds.
Disadvantages of Sberbank Bonds
The disadvantages of Sberbank's investment bonds include:
- Contract. The terms in the document are rather vague, leading potential investors to realize that they may not receive any income at all. This deters many from signing the contract and investing in this instrument.
- Profit. The profitability of these securities primarily relies on the national currency's exchange rate. Profit can only be achieved if the ruble appreciates. If it continues to decline, coupon payments may only amount to 0.01% annually, implying that the sum does not increase. Concurrently, the investor may face losses due to devaluation.
- Absence of Guarantees. There is no 100% assurance for the investor that they will ultimately realize a profit; this is out of their control.
- Devaluation. Bonds are issued in rubles, meaning payouts can only be received in the national currency. During devaluation, it's generally more beneficial to hold assets in dollars or euros.
- Inconvenience. To recover nominal value and make a profit, it is crucial not to lose the certificate. The bond must be retained until the time of payment.
- Low Liquidity. Selling the securities on the secondary market for even the nominal value can be quite challenging. There is limited demand for the document. Therefore, if funds are urgently needed, it may require incurring significant losses on the investment.
The abundance of negative feedback may be attributed not only to the shortcomings of the instrument but also to the bank's policy. The institution does not actively foster a positive online image nor does it defend its position, primarily focusing on serving existing large clients who will invariably purchase bonds to diversify risks. Thus, smaller investors are often left out.
When purchasing, investors might incur additional expenses that inevitably reduce the instrument's yield. The exact figures depend on the chosen tariff.
Purchasing Sberbank bonds can be a risky endeavor, suited for those who wish to diversify risks and are not afraid to possibly lose part of their capital. In this case, it might be much more effective to invest in Eurobonds.
