Corporate bond dividend drop

Ranger8

Could someone explain to me why over a 5yr period a Halifax corporate bond dividend which gets paid every 3 mth has gradually dropped nearly £400, hasn`t started to go back up.

Reaper

Aren't corporate bonds normally fixed rate? Which one have you got?

Ranger8

Halifax Corporate bond D
http://funds.ft.com/funds/halifax/investmentfundmanagers/EQUKCB

Reaper

That explains it, you are invested in a corporate bond fund, not an individual bond.

The fund has to keep buying new bonds to replace ones that have completed and for new investors.

The yield they get on those depends on market conditions at the time. So if lots of people want to buy bonds the price they pay goes up and the yield they get from them goes down.

Looking at that graph you link to I would guess that is what has happened. The value of the fund has gone up 6.7% over the year. So you might have got less income but if you sold your holding today you would get 6.7% more for it than if you had done so a year ago.

Ranger8

Many thanks, I was going to say I`m a financial idiot but I`m only am idiot .

dunstonh

Halifax's fund is poor quality. You ought to look at the whole of market options and perhaps diversify around the bond types (have some strategic bond and high yield bond ready for when the unit prices next take a hit on standard corp bonds).

Ranger8

dunstonh wrote: »

Halifax's fund is poor quality. You ought to look at the whole of market options and perhaps diversify around the bond types (have some strategic bond and high yield bond ready for when the unit prices next take a hit on standard corp bonds).

As usual your advice is extremely welcome and I`m sure its the right thing to do but unfortunately it is wasted on me, I am an idiot.:o
So keeping that in mind what should be my next course of action ?
I presume it will be to contact an FA but how do I know which to put my faith and money to ?:think:

dunstonh

I presume it will be to contact an FA but how do I know which to put my faith and money to ?

You should not contact an FA. You did that already and ended up in the Halifax fund. You should contact an IFA. They are the only ones that can give you advice with full access to the whole of market.

Ranger8

dunstonh wrote: »

You should not contact an FA. You did that already and ended up in the Halifax fund. You should contact an IFA. They are the only ones that can give you advice with full access to the whole of market.

Sorry to ask again but how do I tell good from bad, what do I have to look for in a IFA, someone local ?

dunstonh

Ranger8 wrote: »

Sorry to ask again but how do I tell good from bad, what do I have to look for in a IFA, someone local ?

Statistically, IFAs have the lowest level of complaints at the FOS despite handling the majority of regulated advice transactions. So, generally, the odds of getting a bad one are unlikely.

Look for a local firm and not a national firm. The latter can suffer a salesforce mentality (like the banks). There are some rule changes coming in 2012 which will see many IFAs (and FAs) stop trading or drop to a restricted advice level. So, a good question to ask is what they will be doing after the "retail distribution review". You dont want one that gives you advice now but wont be there in 3 years time.

Your transaction doesnt require anything specialist and really its only probably a provider/investment spread issue that needs sorting. Most IFAs can do that in their sleep.

If its not a large investment, then you could even consider going DIY and spending a bit of time doing your own research. Given that bank funds typically are poor to bad, you couldnt really do a worse job yourself.

Rollinghome

dunstonh wrote: »

So, generally, the odds of getting a bad one are unlikely.

Yet another great sales pitch for IFAs, which of course is what most IFAs are trained for and best at.

But many would beg to differ, including Paul Lewis of the BBC Moneybox programme and many other more objective observers than IFAs themselves: http://www.web40571.clarahost.co.uk/archive/talks/20071105FSRF.htm .

Justin Modray, himself a former IFA, has been very outspoken about the problems of the industry and explains in various articles including here how to avoid some of the pitfalls: http://candidmoney.com/articles/article126.aspx

Which is why the FSA are forcing through a sea-change to the way IFAs operate under the 'RDR' for 2013. Let's hope it does substantially improve the current situation because there clearly is a need for good financial advice.