Medium Risk Bond

waxy_gordon

Hi, first post so be nice to me.

Hypothetical question, if you were to put £20k into a medium risk bond for 12 months what would your likely return be at the end of the year?

dunstonh

Can you clarify what you mean by bond?

Bond is one of the most misused terms going on savings/investment products and could mean many different things. as such, your question is not possible to answer at this stage.

waxy_gordon

dunstonh wrote: »

Can you clarify what you mean by bond?

Bond is one of the most misused terms going on savings/investment products and could mean many different things. as such, your question is not possible to answer at this stage.

Probably easier if I tell you why I need to know. I recently borrowed £20k from my parents to open a new business. The deal was I would pay back £1k a month, however things have gone very well and, rather than look for more credit I would prefer to keep the loan for a year and pay my parents the equivalent amount they would receive if they were to invest in a medium risk product.

Reaper

Depends what you want to compare it with. You could see how the FTSE All Share performs over a year if they would have invested the money in shares. Rather well recently though it may yet end in tears.

From your use of the word "bond" I assume you were thinking more along the lines of a company bond or similar.

My own personal benchmark for income investments is Royal Sun Alliance preference shares (RSAB). A bit odd but as it is my biggest holding I judge other income purchases on whether they are more/less risky and offer more/less of a return.

At current prices you could buy them for a yield of 6.3% so that would be my (not very scientific!) answer. But I'm sure somebody can come up with a better one.

vectistim

I believe by messing about with funny current accounts 3% is achievable on a no-capital risk basis. A three year loan from Zopa for an A* person is apparently around 6.4%, so how about splitting the difference 4.7%?

Jegersmart

waxy_gordon wrote: »

Probably easier if I tell you why I need to know. I recently borrowed £20k from my parents to open a new business. The deal was I would pay back £1k a month, however things have gone very well and, rather than look for more credit I would prefer to keep the loan for a year and pay my parents the equivalent amount they would receive if they were to invest in a medium risk product.

How far into the 20 month period of the loan are you? Have you already covered the loan amount?

J

badger09

waxy_gordon wrote: »

Probably easier if I tell you why I need to know. I recently borrowed £20k from my parents to open a new business. The deal was I would pay back £1k a month, however things have gone very well and, rather than look for more credit I would prefer to keep the loan for a year and pay my parents the equivalent amount they would receive if they were to invest in a medium risk product.

Where did your parents have the £20k saved/invested before they loaned it to you?

If it was in a 'typical' current or savings account, it would probably be earning around 2% max. If they had to sell part of a FTSE based S&S ISA, they will have 'lost' considerably more than that.

Having loaned my son money in the past, I didn't expect any interest - just regular repayments of capital, because that is what we had agreed .

Have you asked your parents if they are happy for you to keep the loan, rather than repay £1k per month? If they are, and no interest has been mentioned before, I expect they would be pleased to get a bit more than the best 'easily' available rate, finger in the air 4% :cool: