the problem with bonds?

jamescredmond

MSE has suggested the P.O geb but I notice some members are averse - even hostile to this form of investment. why?
2nd bite of the cherry - a friend finished his mortgage some time ago. property recently valued @ 300k. he is surrounded by people who tell him he's mad to be sitting on the equity at the age of 49 and urge him to free up the assets and invest using pro advice. the poor lad's confused but considering a min. investment option. as far as i'm concerned he should stay put with the security of a roof that's paid for. who is right?

dunstonh

It should be noted that the term bonds is used for too often to mean different things. In this sense you are referring guaranteed equity bonds.

MSE has suggested the P.O geb

MSE is not authorised to give financial advice and that article in the board is quite old now and that version of the GEB is no longer available.

I notice some members are averse - even hostile to this form of investment. why?

http://forums.moneysavingexpert.com/showthread.html?t=194188 and
http://forums.moneysavingexpert.com/showthread.html?t=196334

These two threads give all the key reasons why GEBs are poor value.

he is surrounded by people who tell him he's mad to be sitting on the equity at the age of 49 and urge him to free up the assets and invest using pro advice.

What do you mean by free up assets? If he has surplus money sitting in a savings account, then investing it could well be a very good option. If you are talking about borrowing against equity to invest, then it is not a good option.

Whatever happens, GEBs are not a good option.

meanmachine_2

Equity in property is not free money. It's merely the difference between the price your friend paid and what the market currently can sustain.

Unless he downsizes, or lives in a cardboard box, all that equity can do for him is enable him to borrow against it.

Withdrawing equity from the family home to invest elsewhere is stupid.

In five years' time IRs could be three times where they are now, and the market value back to where it was when your friend first bought the place.

Then what would they do?

jamescredmond

dunstonh wrote:

It should be noted that the term bonds is used for too often to mean different things. In this sense you are referring guaranteed equity bonds.



MSE is not authorised to give financial advice and that article in the board is quite old now and that version of the GEB is no longer available.



http://forums.moneysavingexpert.com/showthread.html?t=194188 and
http://forums.moneysavingexpert.com/showthread.html?t=196334

These two threads give all the key reasons why GEBs are poor value.



What do you mean by free up assets? If he has surplus money sitting in a savings account, then investing it could well be a very good option. If you are talking about borrowing against equity to invest, then it is not a good option.

Whatever happens, GEBs are not a good option.

many thanks again. have read the links and can now see what a non-investment option these geb's really are. as for my friend, I'm going to print off your post, show it to him and the people who have attempted to steer him in the wrong direction and let him buy me a beer. I will read out your advice in our local pub to cause max. embarrassment and put a stop to this nonsense.

jamescredmond

meanmachine wrote:

Equity in property is not free money. It's merely the difference between the price your friend paid and what the market currently can sustain.

Unless he downsizes, or lives in a cardboard box, all that equity can do for him is enable him to borrow against it.

Withdrawing equity from the family home to invest elsewhere is stupid.

In five years' time IRs could be three times where they are now, and the market value back to where it was when your friend first bought the place.

Then what would they do?

exactly. another quality post that I'm going to print off and bandy about the pub. my beer will go warm from the red-faced heat.