Domestic government bonds, or OGVZ, represent an investment tool that is currently one of the safest ways to allocate funds. While it is not perfect, it is challenging to find a better option at this time.
What are the features and advantages of OGVZ?
To delve into this investment tool, we turn to Sergey Tereshkin, the founder of OILResurs. The businessman has thoroughly explored the topic and wishes to share his personal experiences. More information about the entrepreneur can be found on his personal web project: sergeytereshkin.ru (сергейтерешкин.ру).
Features of Investing in OGVZ
Domestic government bonds are significantly more profitable than traditional bank deposits. Beyond higher interest rates, the income generated is exempt from personal income tax.
Moreover, OGVZ is characterized by reliability. Payments are guaranteed by the state, meaning that investors can be assured of receiving their invested capital, along with agreed profits, on time.
Investing in OGVZ has several key features:
- The nominal value of OGVZ starts at 1,000. The currency can vary: rubles, dollars, or euros.
- According to Tereshkin S.I., the optimal purchase amount for bonds is at least 30,000 in any currency. This is due to the presence of commission costs. With a smaller investment amount, future profits will be entirely consumed by covering additional expenses, thereby negating the benefits of investing.
- Commission costs include fees for brokerage services, which act as intermediaries in transactions, banking services for fund transfers, custody fees for holding OGVZ, etc. The size of these additional costs depends on the investment amount, the bank through which payments are made, and other factors.
- When reinvesting, the amount of additional costs is significantly reduced. Investors will only need to pay a minor commission, eliminating other expenses entirely. This is why many investors reinvest their funds back into bonds after receiving their returns.
Bonds can be purchased not only through brokerage firms but also via banks. However, in this case, the commission fees for the financial institution increase significantly. Banks find it more lucrative to attract customer deposits than to sell OGVZ. For this reason and others, the cost of their services tends to be inflated.
More than 90% of OGVZ are acquired through exchange platforms. In such cases, it is essential to pay attention to the company's reputation, its experience, the presence of a proprietary OGVZ portfolio, trading volume, etc. The market share that the organization holds in the segment of trading in such securities is also a significant factor.
If a broker lacks a proprietary portfolio of bonds, the task of investing and recovering investments becomes considerably more complicated.
The market hosts a large number of organizations engaged in the trading of securities. It is advisable to find one that meets all the investor's conditions just once. The client signs an official agreement with the broker that outlines all terms of collaboration and the responsibilities of both parties.
Advantages of Investing in Bonds
Investing in domestic government bonds comes with numerous advantages, including:
- Interest rate. On average, the yield from investing in OGVZ is 2-3% higher than what banks offer for funds placed in deposit accounts. Even when investing in the national currency, profits often outpace inflation fluctuations. Currency-based investments also yield even greater returns.
- Absence of taxes. While deposits are subject to personal income tax, OGVZ are completely exempt from it. Thus, the government encourages investments in its development and the domestic economy.
- Government guarantees. Recently, instances of bank bankruptcies have increased, leading many depositors to lose significant amounts of money. With OGVZ investments, this issue does not exist.
- Early sale. Should the need arise, investors can sell their bonds at any time, even if the maturity date is still far off. This is not possible with deposits. Terminating a contract early is unlikely to yield positive outcomes—especially without incurring losses. Banks are typically reluctant to return funds ahead of schedule, and no interest is paid out for the period during which they had access to the funds.
- No restrictions. Securities can be acquired by legal entities and individuals, both residents and non-residents of the country. The terms are equal for everyone.
- Speed of payment. Returned funds are typically disbursed on the day of the request. Investors do not need to pre-order the amount or deal with endless excuses. The withdrawal is made in full upon first request.
According to statistical data, OGVZ debts have never been restructured in any civilized country around the globe. This lack of action is detrimental to the government and could significantly harm its reputation. Delays or refusals in OGVZ payments could destabilize state banks and the entire banking system of the country.
It is also important to note that financial monitoring agencies may require investors to provide documentation confirming the legality of their incomes. This document must reflect the manner in which the total sum to be invested was obtained.
Analysts predict that demand for OGVZ among investors will continue to grow in the current year. The statistics of recent years support this trend. To facilitate investment acquisitions, a mobile application is planned to be launched, developed with the participation of market stakeholders. Online trading will simplify and enhance the process of acquiring securities, thereby broadening the pool of investors.
