A bill of exchange is a written obligation of a bank, possibly of a company, to pay a sum of money on a specified date to a person indicated in the bill of exchange. Bills are issued in paper form, because they are issued in a specific name. Debt paper has no time limit or amount limit. After repayment of the bill, income and a fixed percentage are paid. Now basically everyone on the market writes discount bills, which are canceled by the amount indicated on the paper, but initially they pay a lower price for it - discount.
The bill market is not as developed as the stock market, but nonetheless, investments can bring quite a large income compared with income from bonds or bank deposits. I must say that this investment will be beneficial only if you intend to put into circulation from 1 million rubles.
Plus bills
What is the advantage of these securities? Why is it beneficial to deal with them? Investors who do not expect large returns in a short time with the likelihood of being left with nothing prefer fixed income on invested amounts. Their choice falls on government bonds, travel certificates, deposits. Bills are rarely accessed, although they can generate good income. As a rule, banks offer interest and discount bills.
Often the profitability of bills is equal to the income earned on deposits or bonds. Of course, we mean reliable promissory notes of large banks with state participation - Sberbank, Gazprombank, VTB.
Exemplary math
After six months, a Savings Bank bill gives a yield of 5% per annum, and after a year - 6%. Annual deposits at the same time have an income of about 9%. Bonds of VTB, Gazprombank yield about 6% per annum. By the way, Sberbank also offers a discount bill as a profitable product.
Only bills of low reliability can compete with deposits and bonds of state-owned banks. But this is a big risk, here the investor himself decides whether to invest his money in banks and financial companies or not.
Another important point
But there is one very important advantage of a bill: with this debt paper you can pay, for example, for an apartment or a car, and it is also accepted as collateral when applying for a loan application.
Debt paper can be transferred to another person, as well as simply sold.
A sample of a discount bill, as well as other types of written banking obligations, can be viewed on the Internet.
Cons of bills
Debt securities are not very popular with private investors, because they have a number of shortcomings that can quite make a person not pay attention to such investments.
The most important minus is the amount of investment. An investor must be a very wealthy person, ready to invest at least 1 million rubles in debt paper.
Bank bills are not protected in the event of bank bankruptcy. Knowing how often in Russia licenses are revoked even from reliable at first glance banks, people refuse to take risks by buying debt paper. Some banks continue to operate, but may default on promissory notes. In this case, the investor also does not receive money.
Individuals who have money on deposits fall first of all to creditors during the bankruptcy procedure, and billholders are assigned to the 5th stage of creditors.
Non-credit organizations may also have defaults on bills.
The difficulties of early return
On bills it is much more difficult to return money before the end of the term than on deposits, even which are concluded on the condition of impossibility of early withdrawal of funds. That is, if an investor urgently needs his money invested in a bill, he will have to sell debt paper in the secondary market and, most likely, at a price even lower than the purchase price.
Where and how to buy a bill?
If, nevertheless, all the shortcomings of promissory notes did not stop the investor, you can find out in this part of the article how to get the paper and where.
Companies that want to place a bill of exchange usually entrust this procedure to banks, investment companies that are financial agents. This also applies to simple discount bills from Sberbank, for example. The first owner of the bill is a financial agent, other market participants are already buying from him. So private investors buy all bills already in the secondary market.
Although the bill has a cash equivalent, it is not traded on exchanges, so average prices can be viewed in the Russian bill system (PBC), as well as on the official websites of news agencies - Finmarket, Interfax.
Even if you liked a certain bill, it is impossible to buy it on the secondary market yourself, you will need to contact a professional intermediary. Typically, these are banks and investment companies (IC Veles-Capital, IC Region, for example).
The procedure for purchasing a debt obligation is extremely simple. An investor signs a regular paper purchase agreement with a financial agent or professional market participant. Pays the transaction from his account plus interest for the transaction.
The amount of commission to agents ranges from 0.3-2.5% of the transaction amount. In any case, at least $ 100 must be available. A private person can contact the same intermediary or financial agent again if he does not want or for some reason cannot wait for the maturity of the bill. But the commission will have to be paid again in the same amount. Accounting for discount bills due to these nuances does not seem simple.
The impossibility of speculation
It will not work to trade bills on sites, so you should not wait for speculative demand for them. Since each time it will be necessary to pay a commission to intermediaries, all these operations will be unprofitable. You need to remember about 13%, which will have to be paid to the tax authorities if the transaction is profitable. It is extremely rare for private investors to sell promissory notes ahead of maturity.
Sberbank bills
Sberbank offers interest ruble bill and currency bill. Revenues are accrued in the form of interest.
Also on sale is a discount bill, also in rubles and foreign currency. The difference between the repayment amount and the purchase amount will be the income, amount (par) and the selling price of the bill of exchange to the first holder of the bill.
An interest-bearing bearer debt shall be executed with a pre-determined repayment term and with any term, but not earlier than a certain date. This is the difference between a discount bill and a percentage bill. But this is only a cursory glance. But there are a few more nuances.
There is a slightly different repayment system for discount bills: on a specific date or on any day, but not earlier than the date indicated on the bill.
There are convertible bills of Sberbank. The cost in paper is written in US dollars or euros, but it is obligatory indicated in them that payment will be made in rubles on the maturity date. Such a bill is also purchased for rubles.
Note to investor
Currently, bills of exchange of more than 200 companies and banks are traded on the market, many of them offer discount bills. Specialists of the stock market and investment companies recommend that private investors invest in bank bills, since the Central Bank maintains tight financial control of all banks and forces them to disclose their financial position on official websites.Here, even the investor himself, having minimal knowledge, will be able to assess the reliability of a particular bank.
At risk are always promissory notes for which they offer high interest, and they are traded by little-known companies with closed financial statements. Very often, such companies are ordinary financial pyramids. It will be extremely difficult or impossible to return the money.
The bill usually has strict repayment dates. It is advisable to receive money on this day or as much as possible on the next two banking days. The repayment of a discount bill is clearly at par at the end of the term. Of course, no one takes any fines and additional interest, they usually go towards the investor, but they have the right not to pay an overdue bill. You can get the money yourself, and entrust it to the financial agent or broker who executed the transaction. But at the same time again you have to pay interest. So it’s more profitable to pay off privately. By the way, Sberbank also offers a simple discount bill.
The importance of proper design
The 1930 Bill of Geneva Convention lays down very strict rules for the design of bills and maturities. If at least one of the requirements is violated, this will allow us not to consider the document a bill of exchange, so you need to carefully buy a debt obligation in the secondary market, there are many fakes. Banks or drawer companies have the right to refuse to cancel a bill issued in violation.
The most counterfeit bills in the secondary market are securities of Sberbank, Gazprombank, since only they are mainly traded on the market.
Even if the investor works in the market through an intermediary, you should not fully rely on his decency and professionalism. In any case, you will need to request additional expertise from the drawer for the authenticity of the paper.
Many financial experts believe that a bill is not an investment for individuals. Those who disagree with them have calculated everything, analyzed and are ready to take risks, it is better to buy bills closer to the end of the quarter, half a year or year. Then the ruble mass in the market decreases, and financial agents give more favorable interest on repayment.
Conclusion
So, the private individual must decide whether he is ready to invest in a bill or not. Now on the market, these debt securities are represented by discount bills. That is, income is the difference between the purchase price and the repayment amount. It is advisable to pay the bill strictly on the date, otherwise they may refuse to pay. In order to profitably invest in bills, you must have from 1 million rubles to complete the transaction, otherwise it will be unprofitable. On semi-annual bills on average give from 5-7% per annum. Of course, there are higher percentages, but here the risk of losing everything is enormous. Even if you decide to invest money in a bill, you cannot buy it yourself, you will need an intermediary - a broker, banks, investment companies. When making a transaction, they take a commission of 0.3-2.1% depending on the amount of the transaction and the drawer. It is better to buy bills from banks, because the Central Bank has a strict policy, and the financial results of any bank can be viewed on its official website and decide on a purchase.