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Jennifer, a 61-year old retiree, is an enthusiastic bondholder. For more than 15 years, she has been a staunch advocate for them, encouraging her friends and family to buy them too. As a result of her influence, her son is now a bondholder as well.
Jennifer is very clear about why she is so willing to recommend these particular securities: she has found that the returns she gets from them are superior to those she has received from her other investments. She also likes the security they offer: “To me, they are the safest way of investing, especially in these difficult economic times.”
Senior Operations Officer at the Central Bank of Barbados, Linel Franklin, confirms that by their nature, savings bonds are low risk investments. “Savings bonds are sold at a discount: for example, you pay $76.24 per $100 nominal value and get the full $100 after the bonds mature. You know what your return will be from the time of purchase.”
Franklin reveals, however, that although savings bonds are five year securities, bondholders are not required to hold them until maturity. “Savings bonds are near cash instruments. That means that if at any point you need money, you can cash them in.”
Jennifer can attest to this. A few years ago, when she decided to buy a house, she cashed in some of her bonds to help pay for it. The flexibility they allow is yet another reason she is so willing to endorse them.