Why investors should prefer Treasury Bonds instead of CSE?

DeepFreakingValue

DeepFreakingValue

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Why would a prudent investor invest in more volatile and high risk stock market with an average yield of less than 8% per annum that comprises of companies with ROI/NP margins of less than 20% p.a instead of investing in risk free government treasury bonds with a guaranteed yield of 30% per annum for next 5 years?

- During last 5 years CSE value has appreciated only 44% with an average growth of 8.8% per annum. (Details given below)
- Latest 5 Year Treasury Bond rates reached 31% per annum at the latest auction held on 13th October 2022. (Details Given below)
- Net Profit margins of an average Sri Lankan company is less than 20% per annum (without adjusting for increased taxation)
- Stock market investment carry high risk whereas government bonds are risk free.

CSE Growth during last 5 years

Why investors should prefer Treasury Bonds instead of CSE? Screen34

ASPI on 14th October 2017 - 6380
ASPI on 13th October 2022 - 9148
% yield/gain during 5 years - (9148-6380)/6380 = 44%
Average per year = 44%/5 = 8.8% p.a

https://www.investing.com/indices/cse-all-share

Treasury Bill/Bond Yield for next 5 years
Annual yield for next 5 years by investing in Government treasury Bonds reached 31% per annum at the latest bond auction. Press realease given below.

Why investors should prefer Treasury Bonds instead of CSE? Screen35

https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20221013_treasury_bond_issuance_held_on_13_october_2022_e.pdf

Forecast Operating Margins of JKH up to year 2025

Please find below the operating margins of Sri Lanka most diversified conglomerate John Keells Holdings PLC. It indicates an operating margin of 5.7% p.a forecast for 2025.

Why investors should prefer Treasury Bonds instead of CSE? Scree106

https://m.marketscreener.com/quote/stock/JOHN-KEELLS-HOLDINGS-PLC-6491987/financials/

Citizen Silva

Citizen Silva

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DeepFuckingValue wrote:Why would a prudent investor invest in more volatile and high risk stock market with an average yield of less than 8% per annum that comprises of companies with ROI/NP margins of less than 20% p.a instead of investing in risk free government treasury bonds with a guaranteed yield of 30% per annum for next 5 years?

Why would you keep SL Rs bonds when there is real risk of the currency losing value?

- During last 5 years CSE value has appreciated only 44% with an average growth of 8.8% per annum. (Details given below)
- Latest 5 Year Treasury Bond rates reached 31% per annum at the latest auction held on 13th October 2022. (Details Given below)

What is the average yield over the last 5 years?

- Net Profit margins of an average Sri Lankan company is less than 20% per annum (without adjusting for increased taxation)
- Stock market investment carry high risk whereas government bonds are risk free.

DeepFreakingValue

DeepFreakingValue

Manager - Equity Analytics

Posts : 158
Equity Stars : 5035
Reputation : 5
Join date : 2010-05-08

Citizen Silva wrote:

DeepFuckingValue wrote:Why would a prudent investor invest in more volatile and high risk stock market with an average yield of less than 8% per annum that comprises of companies with ROI/NP margins of less than 20% p.a instead of investing in risk free government treasury bonds with a guaranteed yield of 30% per annum for next 5 years?

Why would you keep SL Rs bonds when there is real risk of the currency losing value?

CBSL Governor has guaranteed that that there will be no further devaluation of the LKR in the near future. We are suppose to believe him

- During last 5 years CSE value has appreciated only 44% with an average growth of 8.8% per annum. (Details given below)
- Latest 5 Year Treasury Bond rates reached 31% per annum at the latest auction held on 13th October 2022. (Details Given below)

What is the average yield over the last 5 years?

With last 5 year average 8% p.a return from stock market you need to rotate your portfolio 4 times to reach 32% per annum. Generally there are only 3-4 rallies within a year. You think you will win all 4 trades. Why risk your money, sit back and earn 32% p.a. Time and stress can be invested elsewhere and get additional return.

- Net Profit margins of an average Sri Lankan company is less than 20% per annum (without adjusting for increased taxation)
- Stock market investment carry high risk whereas government bonds are risk free.

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Why investors should prefer Treasury Bonds instead of CSE?

1 Why investors should prefer Treasury Bonds instead of CSE? Thu Oct 13, 2022 5:40 pm

DeepFreakingValue

2 Re: Why investors should prefer Treasury Bonds instead of CSE? Thu Oct 13, 2022 10:32 pm

Citizen Silva

3 Re: Why investors should prefer Treasury Bonds instead of CSE? Thu Oct 13, 2022 11:31 pm

DeepFreakingValue