Warren Evans Bond

grey_gym_sock

also, if you've just eaten a lot of chocolate, do you make worse (or better) investment decisions?

EdGasket

With interest rates at record lows and near to zero, they can only go higher. Hence any form of fixed-rate bond should be avoided because when interest rates rise, the capital value of the bond will fall as the interest on it becomes less attractive in a higher interest-rate environment.

Generali

EdGasket wrote: »

With interest rates at record lows and near to zero, they can only go higher. Hence any form of fixed-rate bond should be avoided because when interest rates rise, the capital value of the bond will fall as the interest on it becomes less attractive in a higher interest-rate environment.

That they can't go lower doesn't mean they'll go higher.

If the OP holds the bond to maturity she'll get back her entire investment assuming they don't default.

grey_gym_sock

yes, it's easy to overstate the risks of bonds.

when interest rates rise, bonds are likely to fall, but (a) who knows when that will be? (b) shares are also likely to fall when interest rates rise, perhaps by more.

the worst-case short-term falls are certainly much bigger for shares than for bonds. you can also limit the potential falls with bonds by buying shorter-term ones, which will be less affected by rising interest rates.

though it is also possible use cash instead of bonds - i.e. (apart from cash for short-term spending plans) to use cash to cushion your portfolio in case shares fall.

Jevvers

EdGasket wrote: »

With interest rates at record lows and near to zero, they can only go higher. Hence any form of fixed-rate bond should be avoided because when interest rates rise, the capital value of the bond will fall as the interest on it becomes less attractive in a higher interest-rate environment.

They would have to rise a lot in three years to touch 7.5%. I agree I wouldn't want to lock myself into 3 or 4% at this point, but even with inflation, 7.5% over three years is good.

grey_gym_sock

i should perhaps have said: it's easy to overstate the risks of having a broadly diversified exposure to bonds. (in response to the suggestion that bonds in general should be avoided.)

an individual bond carries much greater risks, similar to an individual share.

gozomark

Jevvers wrote: »

They would have to rise a lot in three years to touch 7.5%. I agree I wouldn't want to lock myself into 3 or 4% at this point, but even with inflation, 7.5% over three years is good.

it is if the 7.5% carries the same risk as gilts, but it doesn't, its somewhat higher. You are gambling a maximum return of 7.5% compounded v the risk of significant capital loss. Whats the chance this company goes bust, and bond holders lose the lot ? I don't know, but thats what an investor needs to consider, much more than a possible small uptick in interest rates in the next couple of years.

Ricky0859

It is important to take note of the following:

1. Warren Evans plc appears to be a newly-incorporated company with a share capital of £50,000 - possibly not a lot for a company hoping to open several stores. The amount of capital is the minimum required under company law.

2. The bond is guaranteed by Designer Ideas Limited. This company appears to be the company which operates the "Warren Evans" business. Although it is profitable, it does not appear to be a subsidiary of Warren Evans plc. The latest available data suggests that it has a deficit on its current assets, i.e. it does not necessarily have adequate working capital to underpin the guarantee that it has provided in respect of the bonds to be issued by Warren Evans plc.

It is questionable as to whether these aspects have been adequately addressed in the promotional material.

jimjames

You only have to see the voices of discontent from Co-op bank boldholders looking at facing a capital loss or loss of income to see what can happen to an outwardly secure business.

If there is some unusual company structuring going on as suggested above then you'd definitely want to be very cautious about investing.

kerri_dfw

Well after reading all your opinions I've invested £1000 and we won't invest anymore than that. It's from a sum of money that we didn't expect to have, so we don't deem to have lost anything if we lose all of it as we didn't earn or save the money ourselves. If it pays off then in 3years we'll have increased that £1000 past the rate of inflation. If we lose it all then we lose it all c'est la vie.