Direct holding of Corporate bonds?

C_Mababejive

If you do..why and if you dont..why? Im thinking investment grade not subordinate or similar.. tnx

Linton

I dont hold individual corporate bonds.

Trading high grade bonds doesnt make a lot of sense as their volatility is low - you would find it hard to make a worthwhile capital profit. So you are better off holding to maturity, making them the equivalent of higher return/higher risk fixed term savings.

Because of the risk you would be well advised to hold a number of different ones, and to make it worth the effort you would need a fair amount of cash in each.

My investment strategy is to only hold enough cash to meet my income needs for the next 3 years or so. So there is no need to hold a number of high value fixed term savings accounts. It would in any case be too much effort ensuring the right amount of cash was held in the right bonds to mature when required.

Corporate bond funds perform a different role. As you can buy and sell when required without complications they provide useful diversification with simple rebalancing no matter what the size of your portfolio. The advantage over cash for this is the higher income although in a high % equity portfolio this is a secondary concern.

C_Mababejive

Thanks..yes i was looking at possible bonds which have a current good return and not too much of a premium and a few years or less to maturity pretty much as you say a bit like a slightly higher risk higher return investment

planteria

a guy i have a business connection with buys corporate bonds himself (via Credit Suisse, i believe). he does so on a long-term hold basis and is convinced that it is worthwhile. i think i am right in saying that he held Tesco, BMW and Volkswagen bonds..