Shepherd's Friendly 5 year fixed bond

Scrounger

Equivalent interest rate works out at 4.354%   (or 5.443% if liable to BR tax) due to the non-annual compounding.

Scrounger

1socrates1

I think I will buy into VUAG etf instead. Because I am willing to tie the money up longer term and will accrue compound interest. 

artyboy

To me, this actually looks like a very attractive product for anyone paying tax on their savings and looking for capital protection over the mid term. Especially with the likely reduction in interest rates to come...

If there was a monthly income version of this, I suspect they would be swamped with applications.

masonic

artyboy said:

To me, this actually looks like a very attractive product for anyone paying tax on their savings and looking for capital protection over the mid term. Especially with the likely reduction in interest rates to come...

If there was a monthly income version of this, I suspect they would be swamped with applications.

It would beat investing in an equivalent gilt, assuming of course you don't die before it matures. The other risk is that inflation returns. The latter is why I wouldn't lock away at a fixed rate for this long.

masonic

1socrates1 said:

I think I will buy into VUAG etf instead. Because I am willing to tie the money up longer term and will accrue compound interest. 

You won't get any interest on VUAG. You'll get a mixture of capital gain (or loss) and dividend, which is compounded. But it is a more appropriate long term investment if you have the risk tolerance (there is a huge difference in risk between that and the fixed bond). But why opt for a single stock market?

dunstonh

1socrates1 said:

I think I will buy into VUAG etf instead. Because I am willing to tie the money up longer term and will accrue compound interest. 

Thats a bit of a leap from the plan you were looking at.  

That fund gives you the US equity exposure but what about the risk of the portfolio?  i.e. where is your UK, Europe, Asia etc.    Hopefully, you were not doing something daft like putting it all in that one fund with no others?

nottsphil

1socrates1 said:

Oh well back to the drawing board. 

But why?
That Close Brothers one isn't compounded because the interest is paid into your bank account annually. That means you are free to put it back into savings and earn more interest, which is what compounding actually does!

drphila

nottsphil said:

1socrates1 said:

Oh well back to the drawing board. 

But why?
That Close Brothers one isn't compounded because the interest is paid into your bank account annually. That means you are free to put it back into savings and earn more interest, which is what compounding actually does!

Yes, but it's likely to be a lower rate

nottsphil

drphila said:

nottsphil said:

1socrates1 said:

Oh well back to the drawing board. 

But why?
That Close Brothers one isn't compounded because the interest is paid into your bank account annually. That means you are free to put it back into savings and earn more interest, which is what compounding actually does!

Yes, but it's likely to be a lower rate.

But that's not the reason the OP rejected it. Don't know how to multi quote but s/he wrote 

'I think I will go with another bank that offers a little less interest but is compounded like Close Brothers at 4.57 % for 5 years.'

The reason for the rejection was that the interest was paid away annually instead of being compounded!

drphila

nottsphil said:

drphila said:

nottsphil said:

1socrates1 said:

Oh well back to the drawing board. 

But why?
That Close Brothers one isn't compounded because the interest is paid into your bank account annually. That means you are free to put it back into savings and earn more interest, which is what compounding actually does!

Yes, but it's likely to be a lower rate.

But that's not the reason the OP rejected it. Don't know how to multi quote but s/he wrote 

'I think I will go with another bank that offers a little less interest but is compounded like Close Brothers at 4.57 % for 5 years.'

The reason for the rejection was that the interest was paid away annually instead of being compounded!

Fair point