Provident Financial 7% 10yr Corporate Bond

stphnstevey

10yr garanteed 7% return (as long as the company doesn't go bust!)

Never really looked at Corporate Bonds before, but generally haven't seen good things about them. I have seen similiar ones from Abbey for example where half your money is invested in a High Interest account and the other in a Corporate Bond.

In the current climate this does look inticing, although interest rates are bound to go back up and the higher rates were around 7%. Also tied in for 10yrs.

Just wondered what others thought

http://www.h-l.co.uk/shares/provident-financial

The new Provident Financial 7% 2020 Corporate Bond offers interest of 7% a year, fixed for the next 10 years, and your capital back at maturity.
Invest £10,000 at launch, for example, and Provident Financial will pay you interest of £700 every year for the next 10 years and then give you £10,000 back on 14 April 2020. These returns depend on the company remaining in business and being able to pay bondholders.
Within an ISA and SIPP the returns are completely tax free, so in the above example you would receive income of £700 a year through an ISA, regardless of the rate of income tax you pay.
Act by 5 April to invest this tax year

This new bond is available through the Vantage ISA, SIPP and our Fund & Share Account for this tax year and next.
Through Hargreaves Lansdown there are no charges (and no stamp duty) to apply at launch and no annual management charges thereafter.
The bonds will be listed on the London Stock Exchange so your money is not tied up and you can sell your bonds at any time (all you pay is our standard telephone stockbroking commission).
However, as with all investments, there are risks and you could get back less than you invest or lose your initial investment.
This is an individual corporate bond issued by a single company; it is not a fund. Within a fund your investment is usually spread across a number of different companies, reducing your loss if one of the underlying companies fails. You can also leave the choice of bonds to a professional manager.

This bond is issued by Provident Financial - a UK company listed, on the London Stock Exchange. All being well, it will pay a regular income for the next ten years and then return your capital in 2020. However, if the company runs into serious trouble and defaults on this bond, you might lose some or all of your investment and the income might stop.
Please read the risks and rewards section and prospectus which gives more details about this and other risks associated with investing in this bond.
The offer must close at noon on 12 April 2010 (or 5 April if you are investing in an ISA or SIPP for this tax year), so if you are interested you should act quickly.
Offer closes at noon on 12 April 2010
Act now to invest at launch
Why invest

• 7% income, fixed for the next 10 years
• Your initial investment returned after 10 years
• Tax free returns if you invest through ISAs & SIPPs
• Also available in our Fund & Share Account
• Minimum investment £1,000, no maximum
• Invest by telephone, post or online

Learn more about the bond
The main risks

• If Provident Financial fails or becomes insolvent, you might lose some or all of your investment and the income might stop
• Unlike deposit accounts, corporate bonds are not covered by the Financial Services Compensation Scheme
• If you sell during the ten year term you might get back less than you invest
• Inflation will reduce the real value and therefore what you could buy with your investment in the future

Learn more about the risks
Important investment notes

The risks cited above are not intended to be a comprehensive list of all the risks that may apply to an investment in the bond. Prospective investors should read the information set out in the prospectus before deciding whether to invest because you should only invest on the basis of information contained within it. The value of all investments can fall in value as well as rise and so you might get back less than you invest or lose your initial investment. Tax rules referred to are those that currently apply, and can change over time and the benefit to you of investing through an ISA or SIPP will depend on your own circumstances. This email is written for investors who prefer to make their own investment decisions, without financial advice. If you would like help organising your affairs or you are unsure about the suitability of an investment, please contact our Financial Practitioners for advice. This offer is open to, and this email is designed solely for, UK residents.

Lokolo

http://forums.moneysavingexpert.com/showthread.html?t=2358951

.....

purch

I have seen similiar ones from Abbey for example where half your money is invested in a High Interest account and the other in a Corporate Bond

This is NOTHING like that.

This is a security traded on an exchange.

DiggerUK

stphnstevey,
Corporate Bonds are the latest sucker play on the market, stay away from them.

MSE has given no advice on these most dangerous of investments, but there again, from what I have been able to establish they did not speak out against putting money into Icelandic banks either. And they were paying higher returns.

Nobody on these boards, will advise anybody to tie money up for one year, let alone ten, and if interest rates and inflation rises, you won't even be able to sell these zombies for what you paid for them.

You will not get a nice person from the government coming along to bail you out either, if they go tits up. Which I predict they will.

Best of fortune.

Jack29

Where can one see the performance of individual Corporate Bonds over time (e.g. the previous Provident bond at 8%)?

chookie1

DiggerUK wrote: »

stphnstevey,
Corporate Bonds are the latest sucker play on the market, stay away from them.

MSE has given no advice on these most dangerous of investments, but there again, from what I have been able to establish they did not speak out against putting money into Icelandic banks either. And they were paying higher returns.

Nobody on these boards, will advise anybody to tie money up for one year, let alone ten, and if interest rates and inflation rises, you won't even be able to sell these zombies for what you paid for them.

You will not get a nice person from the government coming along to bail you out either, if they go tits up. Which I predict they will.

Best of fortune.

I think you might want to dial the hyperbole back a bit. They're not by a long chalk the "most dangerous of investments". Some are good, some are bad like anything it depends on which one you're looking at. Tesco for instance has bonds out which yield something like 3%. The key is whether you think the issuer will be around for the life of the bond. The more dodgy the company, the better the return you'll be getting - there's no free lunch.

But bear in mind:
This is a loan to the company - not a savings account with them
If you hold to maturity and the company survives, you get the return you thought you would - but if you need to sell out before then, you may not get all your money back.
And there's no government guarantee.

jep49

Hi chookie,or anyone,
i have a few bond funds in my portfolio. Things like Aegon high yield/inv grade. Artemin strat bond.invesco pert tact bond. m&g strat bond, fid money builder. About 8% of portfolio. What your opinion>