First Steps in Investing: Bonds vs Deposits

When you have available funds, a natural question arises: how can you preserve them while earning additional income? A good place to start is by understanding two financial instruments — deposits and bonds.

What is a deposit?

A deposit is money that a customer places with a bank under specific terms and conditions. Depending on the product, these terms may include the interest rate, term, and options for adding or withdrawing funds.

The main advantage is transparency: before placing your money, you can review the interest rate, term, and interest payment conditions in advance.

Doscredobank offers several deposit options. For example, the Bai-Bol deposit allows customers to add funds throughout the deposit term, while accrued interest is capitalized monthly — meaning it is added to the principal amount. Deposits in Kyrgyz soms are available with different terms and interest rates.

The Bai-Bol+ deposit is also available — a replenishable deposit designed for those who plan to place their funds for a specific period and gradually increase their savings.

What are bonds?

A bond is a security. By purchasing a bond, an investor effectively lends money to the government, bank, or company that issued it.

In return, the issuer undertakes to pay the income specified in the terms of the issue and redeem the bond at the end of the established term.

OJSC Dos-Credobank has issued interest-bearing subordinated bonds with a yield of 18% per annum. The nominal value of one bond is KGS 1,000, with a maturity of 5 years and 3 months (63 months). The total issue amount is KGS 200 million.

Interest income is paid in accordance with the terms of the issue. Before purchasing bonds, it is important to review the prospectus, payment schedule, and the risks associated with investing.

What is the difference?

A deposit is generally suitable for those who value simplicity and clear, predetermined terms for placing their funds. Deposits held with OJSC Dos-Credobank are protected under the Deposit Protection System of the Kyrgyz Republic in accordance with applicable legislation.

Bonds may offer other opportunities for earning income, but they are investment instruments and involve corresponding risks. Unlike bank deposits, bonds are not covered by the Deposit Protection System.

Therefore, comparing these instruments based solely on their interest rates would not be appropriate. It is important to consider the investment term, conditions for the return of funds, level of risk, and your personal financial goals.

Where should you start?

Before depositing or investing your money:

• build an emergency fund;
• define your financial goal and investment horizon;
• consider when you may need access to your money;
• carefully review the terms and potential risks;
• avoid placing all your available funds in a single financial instrument.

The key rule for a beginner investor is simple: first understand how a financial instrument works, and only then invest your money.

This material is provided for informational and educational purposes only and does not constitute individual investment advice.