FTSE 100 new 52 week high

sabretoothtigger

The capital value is not fixed or guaranteed. It would be nice to have those certaintys but who knows how much £10,000 will be valued in ten years.

A bond is a promise for money in the future. If money is not worth much now, why would you want to hold it back for ten years. It isnt going up in value. Bonds are a bet, I see them in many ways as less secure long term then shares.

Tesco dividend is good, its very likely they will match the bond returns and increase the original capital value too.
Warren buffet owns tesco shares, you will have to check if he owns their bonds but I bet he doesnt and he is a guy whose studied both avenues I believe.
If we're talking strategics for keeping your pennies then thats the simplest one I ever heard that actually proved to work, copy warren

this is equivalent to 8.8% gross

I see why you'd like this, that sounds pretty high for such a company. You should include inflation in your returns calculations especially if you hold to maturity. So if inflation is 3.3% now then the bond return today is 2% net

For shares if I was to do the same I'd disregard the dividend and just consider capital growth as a real return


The main difference for me between bond and share is bond is a noose on the companys neck, you pay me no matter what or else.
A Share is I hope you do well and we both prosper. Bonds are more absolute, share is to me the thinking mans investment and more profitable on average and I think thats been found correct over time that bonds are for those who are restricted in their choices in some way


I hold 12% bonds but not priced in sterling or dollars, mostly as a play on emerging currency becoming more valued in proportion to the world population and potential rather then its historic wealth (ie. the majority of the worlds young adults live in india)

Hopefully the manager knows how to make that happen and Ive guessed right he is of the same opinion because its the most costly fund at 1.7% pa

regarding bonds and changing world order, heres a vid I spotted on Japan with life expectancy of 86
http://t.co/qp8QCEr

purch

The capital value is not fixed or guaranteed.

I apologise.

I should have said Capital Amount.

Loughton_Monkey

Actually, last time it was above today's close (5891) was June 6th 2008 (5906).

Loughton_Monkey

sabretoothtigger wrote: »

The capital value is not fixed or guaranteed. It would be nice to have those certaintys but who knows how much £10,000 will be valued in ten years.

A bond is a promise for money in the future. If money is not worth much now, why would you want to hold it back for ten years. It isnt going up in value. Bonds are a bet, I see them in many ways as less secure long term then shares.

Chucknorris has got a point. OK, Tesco is not "guaranteed". That's the main risk. But ignoring this, the price is certainly fixed (a) when you buy it, and (b) at redemption. The 5.5% (or actually 5.2% at today's price of 106.33) is also guaranteed.

Therefore, it is a valid vehicle to sit back and watch the steady coupon come in at a rate for which you have budgetted. Ideal, perhaps, for a drawdown pension arrangement.

My only concern would be the long term safety of a single company. We all saw how quickly M&S can lose its status. OK, that wasn't quite fatal, but it is not impossible to construct a scenario over the next 9 years in which Tesco suffers a major 'brand crisis'. First symptom would be huge loss on your bond value (if you sold it) and then possibility of the thing not being paid at all at the end.

Come back Gerald Ratner, all is forgiven......

Mr_Mumble

And the FTSE UK Gilts index is at a six month low. 3.62% for 10 year paper compared to under 3% a couple of months ago.

Ironic that it was BP most responsible for today's high while the drivers for the market - big miners such as BHP and Rio Tinto - fell today.

On the corporate bond topic I'd be concerned about the inflation and currency risks more than the possibility of Tesco going bankrupt in the next xx years. Plenty of UK blue chip bonds are cheaper to insure than Gilts! chucknorris makes a good point regarding the different dynamics of buying a bond and buying an bond index fund. Buying a bond index does negate the attributes of fixed income and known maturity date.

Edit: PS. I wouldn't target a specific level on the FTSE for buying into or out of the market. Individual events e.g. oil spill (down) or Sterling devaluation (up) are going to skew the index but don't tell you whether or not the index is under/overvalued. Imho its best to use, say, the P/E for the entire index and decide whether or not this is good/bad value.

chucknorris

purch wrote: »

I apologise.

I should have said Capital Amount.

It's ok I understand the effect of inflation, I am talking about the nominal value (should the company not go bust). I see the coupon interest as compensation against inflation.

chucknorris

Loughton_Monkey wrote: »

Chucknorris has got a point. OK, Tesco is not "guaranteed". That's the main risk. But ignoring this, the price is certainly fixed (a) when you buy it, and (b) at redemption. The 5.5% (or actually 5.2% at today's price of 106.33) is also guaranteed.

Therefore, it is a valid vehicle to sit back and watch the steady coupon come in at a rate for which you have budgetted. Ideal, perhaps, for a drawdown pension arrangement.

My only concern would be the long term safety of a single company. We all saw how quickly M&S can lose its status. OK, that wasn't quite fatal, but it is not impossible to construct a scenario over the next 9 years in which Tesco suffers a major 'brand crisis'. First symptom would be huge loss on your bond value (if you sold it) and then possibility of the thing not being paid at all at the end.

Come back Gerald Ratner, all is forgiven......

Yes this is exactly how I read it, which is why my intention is to hold the bond to maturity, I am not interested in seeking larger returns, I have made my money now so I just want a reasonable return on it. Obviously I would try and pick a less risky company, I would rather get paid just over 5% and feel safer than picking a company paying say 6.5%. Additionally I would probably not invest more than 5% of my overall investments in one company and probably limited it to 10% overall (so 2 companies at 5% each, I would put a bit more in but right now I am thinking isa only. So as I only have about 60k in stock isa'a now and can only put 10.2k in each year (that's both my wife and I as we do also cash isa's), the amount you can get invested is limited.

I do realise that there is some risk, but I think it's below medium risk and I would rather take that risk than simply leave it in a Ftse tracker and eventually see a downturn or take it out of the isa and lose the tax free status.

I am only looking for a relatively non high risk investment that pays above inflation (hopefully I know there is guarantee as to what future inflation will be). When I sell my investment properties probably in about 10 years, inflation devaluing my capital is going to be my main concern. I even considered not selling up but I really do not want the hassle when I am in my 60's (and it is hassle).

RenovationMan

chucknorris wrote: »

When it goes above 6500 (eventually) I am planning to divert my NEW stocks and shares Isa's into individual corporate bonds as I see limted upside. I plan to leave all my existing Isa's in place until it gets to about 7000/7500 then change them into an isa corporate bond.

Someone please feel free to criticise my plan as it's logic could do with being tested. I am trying to avoid just passively leaving it all in Ftse trackers and falling at the next crisis point (after this recession) by diverting it into bonds at some point.

The quality of your strategy all depends on what you are saving up for, over what sort of period you are investing and what other assets you have. I invest in the stockmarket purely for my pension and so the majority of my cash is invested in equities with some in cash and some in bonds. I have 23 years to go to retirement, hopefully a bit less if my investments go well, and so I want the maximum gain possible even if this means that I see some dips along the way.

I will be following your plan when I get about 7 years away from retirement, locking away the gains I made of the 30 years that I have had a pension just in case we see a correction. Although with the government scrapping the compulsory purchase of an annuity, I may leave more invested in the stockmarket and take an income.

It all boils down to how risk adverse you are. I'm prepared to gamble with my private pension and my home in the short to medium term to go for high growth and a comfortable retirement in the long term.

chucknorris

RenovationMan wrote: »

The quality of your strategy all depends on what you are saving up for, over what sort of period you are investing and what other assets you have. I invest in the stockmarket purely for my pension and so the majority of my cash is invested in equities with some in cash and some in bonds. I have 23 years to go to retirement, hopefully a bit less if my investments go well, and so I want the maximum gain possible even if this means that I see some dips along the way.

I will be following your plan when I get about 7 years away from retirement, locking away the gains I made of the 30 years that I have had a pension just in case we see a correction. Although with the government scrapping the compulsory purchase of an annuity, I may leave more invested in the stockmarket and take an income.

It all boils down to how risk adverse you are. I'm prepared to gamble with my private pension and my home in the short to medium term to go for high growth and a comfortable retirement in the long term.

I'm not saving up for anything, I am simply looking for the best return to protect my current worth (I'm happy with what I have now) from future inflation.

RenovationMan

chucknorris wrote: »

I'm happy with what I have now

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