Alternative forms of investment have become incredibly popular in recent years. But, sometimes you just can’t beat the traditional forms. When it comes to traditional investment, you can’t really get much more traditional than bonds. Savings bonds have been around for many years, and they are generally considered to be a safe investment.
There are lots of different types of bonds that you can invest in, but one that you might have heard a lot about, especially if you reside in Canada, is the Ontario Savings bond. Ontario savings bonds are a popular form of investment, and they are something that a lot of people invest their money in. So, there is a fair chance that you might be considering this form of investment.
If you are thinking of buying Ontario savings bonds, then you likely want to know if they are a good investment. In this guide, we’ll be taking a look at what Ontario Savings bonds are, and lots more. So, if you want to find out, keep on reading.
What are Ontario Savings Bonds?
Well, first things first, let’s take a look at what Ontario savings bonds are. As their name suggests, Ontario savings bonds are a type of bond security that are offered by the province of Ontario, Canada. In relation to some other types of bonds, they are a fairly new creation. But, they have been available for purchase/investment since 2001, so they still have a fairly rich history.
As they are offered by the province of Ontario, both the principal and interest of Ontario savings bonds are backed by the Province of Ontario. In this way, they work similar to the SBA loans that are available in the USA. So, the bonds themselves are guaranteed by the Province of Ontario, but they are not offered by the province. Instead, they are offered by credit unions and financial institutions, such as banks.
This is something that puzzles a lot of people because you would expect these bonds to be offered by the province of Ontario. But, just like many things, these bonds are simply guaranteed by them. This ‘guarantee’ is something that confuses quite a lot of people, but it essentially reduces the risk of offering you the bond for the bank/lender. So your application will be more likely to be accepted, because there is a lower risk.
Are Ontario Savings Bonds a Good Investment?
Now that we have taken a look at what Ontario savings bonds are, it seems only right that we take a look at whether, or not, they are a good investment.
There is one main customer that Ontario savings bonds will appeal to, and that is people who want a safe investment. If you want a safe investment, then Ontario savings bonds are an excellent place to put your money. Ontario savings bonds have next to no risk associated with them, and that is why they only attract certain people. So, if you are one of these people, then yes Ontario savings bonds are a good investment.
But, if you are someone who has a moderate to high risk portfolio of investment, then you likely won’t be attracted to Ontario savings bonds. This will likely also apply to you if you are someone who has a lot of time for your investments to mature. If you have 25-30 years of investment years ahead of you, then you can afford to take more risks. But, if you are approaching retirement, and simply want to add more value to your portfolio, then these risks simply aren’t worth it.
So, yes, Ontario savings bonds are a good investment in terms of safety. But, this investment route will only be attractive to some people. This means that Ontario savings bonds might not be a good investment for you if you prefer high risk investments that could offer high rewards.
Do Ontario Savings Bonds Go Up in Value?
Yes, Ontario savings bonds can go up in value. But, the way in which their value increases differs slightly from the way that other investments will gain value. That is because they are a bond. So, Ontario savings bonds will gain value in the same way that all bonds do.
By this, we mean that the value of your savings bond will increase at a steady amount. The amount that the value increases by will not be extreme, but it will be a decent amount, and that is why this type of investment is seen as safe. Most of the time, when you purchase bonds, they will be sold at a discounted price. The value of the bond will then increase at a steady amount year by year until the bond matures upon which they will usually reach face value. So, your bond will increase in value until it reaches full face value, and then you will get interest on top too.
So, yes, Ontario Savings Bonds do go up in value. But, if you are used to investing in risky investments, the amount of money that you actually make on your bonds when they reach maturity might come as a bit of a disappointment. However, if you want a safe investment, then the money that you can make upon your savings bonds is definitely worth it.
Things to Consider Before Investing in Ontario Savings Bonds
But, as is the case for most investments, there are some things that you should consider before you invest in Ontario savings bonds. So, let’s take a quick look at what they are.
Well, the first major thing that you need to consider is that they expire. This is something that is true of most bond-style investments. When you purchase Ontario savings bonds, they will come with a maturity date. This maturity date effectively works the same as an expiry date. So, when your bonds reach their maturity date, they will no longer increase in value. This is why it is best to redeem your bonds pretty soon after they reach maturity.
The other major thing that you need to consider before investing in Ontario savings bonds is the return on investment (ROI) that you want to make. As we said earlier, Ontario savings bonds are considered to be a safe investment, and for this reason they typically do not gain much value over the years. This is why they are a bad choice if you want risky investments that could make you a lot of money.
Finally, the other thing that you should consider is closely linked with this, and that is when you want the money. Typically, Ontario savings bonds do not take a long time to mature, and this is why older investors tend to choose them. So, if you have 25-30 years of investment opportunity ahead of you, Ontario savings bonds might not be the best choice because once they mature, they will stop gaining value.
Reasons to Invest in Ontario Savings Bonds
So, why should you invest in Ontario savings bonds? Let’s take a look at some of the main reasons.
Well, the main reason that you should consider investing in Ontario savings bonds is because they are a good investment. They might not be that great in terms of ROI when compared to riskier investments. But, if you want a safe investment that is guaranteed to provide results, then Ontario savings bonds are a great choice. This is why Ontario savings bonds are so popular with people who simply want to invest their money for a little while, and those who do not have many investment years left.
Another great reason to invest in Ontario savings bonds is if you want to invest your money on behalf of someone else. For example, if you want to invest a small portion of your money to give to your loved ones. If you give an Ontario savings bond to your child then when that bond matures they will be able to redeem it for cash. So, they are great if you want to give your loved ones a small investment for the future.
But, the main reason why you should consider investing in Ontario savings bonds is because they are secure. These savings bonds are able to offer a security blanket unlike any other form of investment. This is why they are a great choice if you are new to investing, and are playing it safe, or if you are coming to the end of your investment years. They are also great because they can be cashed in at any point, even if they are not fully matured. So, they are the perfect investment if you want to be able to access your capital for a rainy day.
In short, yes, Ontario savings bonds are a good investment. They might not have an excellent ROI, and they might not be as lucrative as some other forms of investment. But, Ontario savings bonds are a safe and secure investment, and that is what makes them so great.