Bank South Pacific, Bonds, central bank, Government Securities, Inscribed stocks, investment, Kina appreciation, money club, national budget, Papua New Guinea, PNG, Port Moresby Stock Exchnage, Treasury bills
Maybe you have read or heard about it somewhere but never quite seriously thought about it as something that can help you grow your wealth. I am talking about Government Securities.
Last year as part of the education drive for my investment club, Grow Wealth Investment Club, our secretary Pamela Ipaia and I attended a seminar run in collaboration by Central Bank of PNG, Port Moresby Stock Exchange, Kina Securities and BSP capital. Like many who attended that seminar, it was Pamela’s first time. Every year, this very important seminar is conducted. But guess what? So many people just don’t care and even if they did cared, say they can’t afford to attend. Even if they can afford, they say they don’t have time. Yet, they say they still want to invest.
Invest! Yes, that’s the key term. If you have to invest, the first most important thing to do is to get yourself educated. Without education, you are certain to lose more or all your money. There is no guarantee that education can make you wealthy.
However, exhaustive research shows that those that have enough knowledge in what they do, in average tends to do well than those that don’t. Billionaire Warren Buffet once said;
“Risk is doing what one doesn’t know”.
That sums up this discussion perfectly well. Government securities are investment assets just like many other investment assets. You can actually invest your surplus money in government securities to grow your wealth.
In this post, I try to help you understand and appreciate the importance of investing in government securities. In the next two posts, I’ll talk about Treasury Bills and Inscribed Stocks, two of which are the government securities available in Papua New Guinea where you can invest as an individual or as an organization.
So what are government securities anyway?
This is the technical definition I got from Bank of Papua New Guinea Information Brochure.
“Government Securities are financial debt instruments which the Government issues/sells to investors to borrow cash and finances its budget shortfalls”
The government like businesses has to make money to survive. It needs continuous supply of revenue to keep it going. In the event that the government’s spending exceeds its revenue, than the government is said to be in debt. That means it must find some money somewhere to keep its operations going. One option from other available options is to borrow money from investors as you have seen from the definition above.
You will remember from media that the PNG national budget for 2014 projects total revenue and grants amounted to K12.7 billion which is K2.2 billion or 21% higher than revised estimates for 2013.
Expenditure totaled to some K15.3 billion showing a deficit of K2.6 billion, compared to K2.5 billion planned for 2013.
What does this imply? Very simply, the government’s expenses exceeded its revenue. That is why the government issued the inscribed stocks to borrow money from investors like you to finance its debt.
You on the other hand, as an investor can take this opportunity to invest your surplus cash into the government securities which historically have low yields but are certain to return you steady returns on investments as compared to highly speculative assets like shares. Here is the catch;
“Any government of the day will always find ways to finance their debt”
Bankruptcy in any government on earth is something I personally couldn’t dream of. It may happen something time, but maybe not so soon. So you investment is government securities is certain to reward you with at least something. If you are very careful and play if you platy big as I always say, you are certain to win big. It is all about probabilities so play your cards right, and you should be glad you did.