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Provident Financial 7% 2020 Corporate Bond
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wholejobs
Posts: 5 Forumite
Anyone had a look at this new Bond that is on offer from Provident Financial?
On the face of it it looks like a decent investment but not sure of how this will compare over time.
Am I right in thinking that a savings account maybe better in that the interest would be compounded year on year thereby increasing the overall return?
Sure there's a way to work this out but my limited knowledge doesn't make it a simple task
On the face of it it looks like a decent investment but not sure of how this will compare over time.
Am I right in thinking that a savings account maybe better in that the interest would be compounded year on year thereby increasing the overall return?
Sure there's a way to work this out but my limited knowledge doesn't make it a simple task
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I was tempted to buy into this, but I don't have a spare £1k!
Erm if you invest the interest then you could get a good deal of compounding.
But even so, savings would never get 7%, you would need 8.75% before tax to get 7% after (and thats just basic tax payer).
If you do not invest for the whole 10 years, your capital may erode (as the bond value you could go down).
Also I don't know how secure Provident are! Could lose it allllll.0 -
Looks like a good deal, i'm hoping someone high a clue can either rain on the parade or back it up and say it's worthy of a punt!
It says that the fund can be bought and sold at any time so you are not locked in for 10 years, but if after launch they value goes down you may find yourself locked in to get it back.....
What typically happens to these bonds during the timeline? Do they have a tendancy to drop in value? Or sit at face value?0 -
Depends on interest rates and demand.
For example, Bond values have risen sharply over the last couple of years because interest rates have dropped dramatically. Therefore people have thought, stuff cash, I'll go for bonds, and a lot of people have invested in bonds, which has risen the prices.
Personally I can see Bond prices going down when interest rates start rising, which will happen in the next 10 years. What you might find, is buy the Bonds after a couple of years and they MAY be cheaper.0 -
can you hold corporate bonds in a s&s isa? If so isn't the interest tax free?
If you had money that you could lock away for 10 years (in this case) then this would be quite a good option? If you view them as safe that is?0 -
If you buy a "bond fund" do you have to hold it to maturity?
I fancy a high-yielding corporate bond fund and reinvest the dividends whilst interest rates are low?0 -
can you hold corporate bonds in a s&s isa? If so isn't the interest tax free?
If you had money that you could lock away for 10 years (in this case) then this would be quite a good option? If you view them as safe that is?
Yes exactly.
Bond interest is taxable, but not inside an ISA.0 -
If you buy a "bond fund" do you have to hold it to maturity?
I fancy a high-yielding corporate bond fund and reinvest the dividends whilst interest rates are low?
No you don't have to hold it to maturity. But bond value may change, so you buy at £1k, after 1 year it could be worth £850.0 -
Buying an individual Corporate Bond is a pretty/very high risk strategy.
As part of a decent sized portfolio of Bonds with a broad spread of quality and maturity this paper looks good value, especially compared to other 10 year maturities of similar quality.
If you are tempted by this, but have never traded in Corporate Bonds/Gilts before then I would think again.
There are far safer/smarter ways to dip your toes into the 'murky' world of Fixed Income.'In nature, there are neither rewards nor punishments - there are Consequences.'0 -
Buying an individual Corporate Bond is a pretty/very high risk strategy.
As part of a decent sized portfolio of Bonds with a broad spread of quality and maturity this paper looks good value, especially compared to other 10 year maturities of similar quality.
If you are tempted by this, but have never traded in Corporate Bonds/Gilts before then I would think again.
There are far safer/smarter ways to dip your toes into the 'murky' world of Fixed Income.
care to share for the newbies?
Im quite new to anything other than individual shares.
I have 2 funds and an ETF in my ISA had them for about 6 months and showing a modest 10.5% gain between the 3, but that's down to luck more than anything tbh.
I have:
Blackrock Abs Alpha UK
Jupiter Financial Opps
Ishares UK Commercial Property REITs ETF
I looked at Income funds, but they all seem weighted to the financial sector.
I feel that I want to reduce exposure to UK and diversify into Far East and Commodoties, possibly an Oil related ETF/ fund?0 -
These Bonds increase in value whilst the interest is accruing. As interest is paid twice a year (April & October), the share price drops back to account for no accrued interest. The Bond can be held in an ISA and a SIPP - so tax free. I think this is a good deal - you could invest in this and next year's ISA!0
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