It's a familiar disclaimer for anyone who has ever purchased stocks or funds: "Investment carries risk."

Miss Pimpen shows Krung Thai Bank’s Government Bond card, which can be used as an ATM card and to buy government bonds at the bank’s ATMs.

But not government bonds, according to economist Pimpen Ladpli. The Thai government has never defaulted on its bond obligations, not even at the height of the 1997 economic crisis.

Ms Pimpen, who oversees development strategy for the bond market at the Public Debt Management Office (PDMO), said it's easy for retail investors to overlook the value of the risk-free nature of government bonds during normal economic times.

But during an economic downturn, when prices for stocks, property and commodities swing and slide, the benefits of surety and certainty offered by government bonds becomes a valuable quality indeed.

Of course, a fundamental principle of investment is the relationship between risk and reward. An investor in the Stock Exchange of Thailand this year has much to smile about, considering the nearly 25% gain in the SET index year-to-date. Contrast that with current five-year bond yields of 3%, and most would say it's an easy choice of where one should park their investment.

Yet an equally important principle of investment is the concept of diversification in order to guard against the risk of any one asset class suddenly falling out of favour.

Ms Pimpen said investors should consider keeping one-fourth of their investment portfolio in government bonds as a safety cushion against the investment risks of other asset classes.

"If you're looking for an investment that allows you to sleep soundly at night knowing you're at no risk of losing your principal or interest earnings, then government bonds are a very attractive option," she said.

The PDMO auctions hundreds of billions of baht worth of government bonds each year to help manage the government's financing needs and the public debt.

The vast majority of government bonds are placed with institutional investors such as banks, insurance companies and asset management firms.

But in recent years, the PDMO has increased its issues of public savings bonds sold directly to the public in order to give investors additional options in managing their personal savings.

The Finance Ministry last Thursday began offering 4 billion baht worth of three-year government savings bonds at annual interest of 3.75%. After withholding tax, the annual return for investors is 3.19%.

These bonds carry a denomination of just 1,000 baht a unit, with a maximum limit of 2 million baht per investor. The subscription period ends next April 5.

The low unit value is in sharp contrast to most bond issues, in which minimum subscription generally begins at 100,000 baht or more. Ministry officials say the small value is in line with the aim of offering the bonds to the general public. Even low-wage labourers or new graduates can invest in them. Investment can also be made through a bank ATM, with purchasers receiving a "bond book" as a record of their investment.

Ms Pimpen said the savings bond issue was intentionally made scripless to avoid past problems. The Finance Ministry said it has 300-400 million baht in unclaimed bonds outstanding simply because investors perhaps lost their bond certificates and were unable to claim their principal upon maturity.

The bond books act similar to a normal bank deposit book. But rather than record the amount of money held in an account, they record the number of savings bond units held by the investor. An investor can sell the bonds back easily with the bond book by simply going to a local commercial bank and presenting their book, with prices set based on current market conditions.

Ms Pimpen said efforts to encourage public investment in government bonds is part of a larger plan to encourage the development of a savings culture within Thai society, particularly the need for people to save and invest for retirement.

She said the ministry has moved away from savings bonds with medium-term maturities such as 10 years or more to focus on shorter-term bonds. Currently the longest duration outstanding is six years, a reflection of the fact that the interest rate cycle is currently 3-4 years.

"Retail investors don't really understand this, so it's better that the savings bonds carry a shorter term," said Ms Pimpen.

Krung Thai Bank’s booth at SET in the City 2012, which ended yesterday. Photos by PATTANAPONG HIRUNARD