Dipping my toe into corporate bonds - Advice requested
VT82
Posts: 1,079 Forumite
I'm running out of places to generate a decent return on my savings, and the outlook for me managing to divest some of it by moving up the property ladder is receding. I am therefore thinking it's time to look at using my S&S ISA allowance.
There is a retail bond that has caught my eye. It is the Alpha Plus 7 year 5.75% Secured Bonds. I am tempted because it is secured on property in London. Yes it is schools, so will count as being secured on commercial property, but for me, being secured at all means it compares favourably to any unsecured retail bond I have seen recently.
My only concern is that the proceeds are to be used to repay shareholder debt, and I can't work out from the accounts how much was paid in dividends last year to see if the coupons will be more or less than this, although the operating profit of £4m last year (on turnover of £58m) should provide a decent interest cover regardless.
I was only thinking of sticking about £2-3k in there, and getting the rest of my allowance into some bond fund and some equity fund by the year end, topping them up over next year also (although not UK as there's where my pension fund is still sitting by default). So as I say, just dipping my toes in. However, I had been planning on opening an S&S ISA through Cavendish, as it was recommended on here and my dad has managed to use it to open an ISA investing in an HSBC Tracker fund quite simply and cheaply. But the advert says the Alpha Plus bond is only available through Collins Stewart, iii, Peel hunt LLP, RM Capital Markets, Selftrade, Shore Capital or Smith and Williamson (or Barclays?). Does anyone know which of these I should use that would be cheapest, and wouldn't conflict with my other plans on what to do with my S&S ISA allowance this year and next (or make it more expensive)?
Thanks for your help!
There is a retail bond that has caught my eye. It is the Alpha Plus 7 year 5.75% Secured Bonds. I am tempted because it is secured on property in London. Yes it is schools, so will count as being secured on commercial property, but for me, being secured at all means it compares favourably to any unsecured retail bond I have seen recently.
My only concern is that the proceeds are to be used to repay shareholder debt, and I can't work out from the accounts how much was paid in dividends last year to see if the coupons will be more or less than this, although the operating profit of £4m last year (on turnover of £58m) should provide a decent interest cover regardless.
I was only thinking of sticking about £2-3k in there, and getting the rest of my allowance into some bond fund and some equity fund by the year end, topping them up over next year also (although not UK as there's where my pension fund is still sitting by default). So as I say, just dipping my toes in. However, I had been planning on opening an S&S ISA through Cavendish, as it was recommended on here and my dad has managed to use it to open an ISA investing in an HSBC Tracker fund quite simply and cheaply. But the advert says the Alpha Plus bond is only available through Collins Stewart, iii, Peel hunt LLP, RM Capital Markets, Selftrade, Shore Capital or Smith and Williamson (or Barclays?). Does anyone know which of these I should use that would be cheapest, and wouldn't conflict with my other plans on what to do with my S&S ISA allowance this year and next (or make it more expensive)?
Thanks for your help!
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Seems high risk to me - far too small.
How about some corporate bond funds?
http://www.fixedincomeinvestor.co.uk/x/default.htmlIn case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:0 -
another interesting link: http://www.telegraph.co.uk/finance/personalfinance/building-societies/9703387/Building-society-Pibs-interest-of-9pc-but-watch-the-risks.html“It is difficult to get a man to understand something, when his salary depends on his not understanding it.” --Upton Sinclair0
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There is a retail bond that has caught my eye. It is the Alpha Plus 7 year 5.75% Secured Bonds.
Have you read this?
http://www.fixedincomeinvestor.co.uk/x/analysis.html?type=bond-of-the-week&cat=analysis-comment&y=2012&aid=867
Personally, I think you need to be diversifying whether you go for equities or bonds, which means either collective investments (funds or Investment Trusts) or 20+ different holdings with a good sector spread.
All bonds yields have dropped over recent months, and even riskier stuff like the preference shares I bought (LLPC, NWBD, RECP, etc.) has seen capital increases, so it's getting harder to find good returns without going up the risk scale.
Even stuff that I deemed too risky to touch like the Enterprise Inns 6.5% 2018 is heading up towards par!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Seems high risk to me - far too small.
How about some corporate bond funds?
I like the idea of knowing the return is guaranteed. And owning it directly would mean there are no management fees like with any fund (however small the fees are). I guess the liquidity of it would be an issue, but I think I can live with that for such a small investment.
Assuming I'm not talked out of it, does anyone know the answer to my question of what is the most reasonable route to investing in it?0 -
Of that list, Selftrade would seem the most likely, but I know that Hargreaves Lansdown are also fairly good regards retail bonds.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
If you want an small investment (say < £20K) in bonds I would recommend that you buy a bond fund. In that way you are putting a small amount of money into a large number of different bonds and so will not be greatly affected should any one go bust.
To buy funds directly you can either subscribe to one of the few new ones made available to the general public or buy on the market. Some of the online brokers will let you do this - iii for example.
Very safe bonds are currently expensive as they provide a refuge from the current poor returns and volatility of equities.0 -
I like the idea of knowing the return is guaranteed. And owning it directly would mean there are no management fees like with any fund (however small the fees are). I guess the liquidity of it would be an issue, but I think I can live with that for such a small investment.
Assuming I'm not talked out of it, does anyone know the answer to my question of what is the most reasonable route to investing in it?
The 'distributors' are listed on the prospectus, why not ring one up and ask? After the 11th December you can buy in the market but then the spread and dealing costs will bite.
Authorised Distributors
Collins Stewart Wealth Management (UK)
https://www.collinsstewartwealth.com
Interactive Investor
https://www.iii.co.uk/investing/news-issues
Peel Hunt LLP
https://www.peelhunt.com
RM Capital Markets Ltd
https://www.rm-capital.co.uk
Selftrade
https://www.selftrade.co.uk/alpha
Shore Capital
https://www.shorecapital.co.uk
Smith & Williamson Securities
https://www.smith.williamson.co.uk/fixed-income-dealing-service
Important Information
This Information Booklet is an advertisement0 -
How about some corporate bond funds?gadgetmind wrote: »Even stuff that I deemed too risky to touch like the Enterprise Inns 6.5% 2018 is heading up towards par!0
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Quite what I am going to do with all my preference shares I have not yet decided. It is tough to contemplate selling when they are paying me such a good income (7-13% after tax).
I'm going to hold for the foreseeable as they won't be hit too hard because the coupons are just so good, plus I bought at a good price and everything is in my wife's name so no tax to pay.
However, undated instruments are more of a worry than dated as the price will be affected more by interest rates.I would have bought more but the buy price quickly went up beyond what I thought was reasonable.
I looked again at the Enterprise Inns bond but eventually bought some RECP as the yield was about the same and the cover looked better.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Reaper, I think you are right about inflation and the likely impact on fixed-rate bonds. How do you think Index-Linked gilts would fair though? On the one hand they should rise with increasing inflation but on the other hand the low yield compared to presumably rising variable rates elsewhere could push them down. Any thoughts what these will do over the next few years?0
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