Bonds safe? What happens when they default

Singapore millionaires stung by the misery of recent bond defaults now have company as the fallout threatens losses for mom-and-pop investors. All four new issues of Singapore dollar-denominated notes targeted at individuals this year have dropped below the par sales value, as failures in the broader market stoke speculation nonpayments will spread. UBS Group AG’s wealth management unit said in an Aug. 16 report that retail investors are being sold "weak" names, and Lombard Odier said they face default risks on securities with poorer credit profiles.

For more information click below link:
(Singapore Mom-and-Pop Investors Face Losses Amid Bond Risks )
By Denise Wee | Bloomberg – Wed, Aug 31, 2016 1:26 PM SGT
https://sg.finance.yahoo.com/news/singapore-mom-pop-investors-face-200000536.html 

Fyi

Bonds are financial instruments where investors are compensated for their time and opportunity cost when they invest in them.

Unknown to many investors, bonds do go into default. This means the company that issue the bonds does not fulfill its  obligation of paying the coupons. When this happens the status of the bond could be downgraded to junk status and price of the bonds will drop. Hence, the investors will not be able to recoup its principal amount as there is a pay out priority given as below:

• First are the secured creditors and holders of senior debt,
• Next are the the ordinary bondholders
• Equity shareholders are last in line

As a result of the default, a bond will either be restructured or the company will file bankruptcy and results in liquidation of assets.

Hence, if a investor has a huge capital for investment, he or she will be wise to consult a professional who could advise him in the appropriate manner to invest in bonds, equities (stocks) or mutual funds as each asset class is important to achieve  a desirable  outcome.

If you need advise or help in this area for investment, protection needs or growth, please contact me by leaving your contact on the right.

"Wealth is not built overnight but over time."