One Year Fixed Rate Bond 8%

Robert_Sterling_3

From Derbyshire Building Society.
https://www.thederbyshire.co.ok
There are Special conditions [ of course ]
One of which is you can't put in more than £300,000
and then only if you put £700,000 into some other more adventurous account.

FangKat

Just had a look on the site Think it should be https://www.thederbyshire.co.uk by the way.
Could not see anything about 8pc 1 year bond - just about issue 52 which was I think 5.35

am I missing something cos 8pc Bonds are quite attractive for 1 year..

?

Shinds

ok - Just spoken to 'em.

The minimum investment is £10,000.

30% of that money goes into the one year Bond at 8% Interest. The other 70% goes into Stock n Shares. But they guarantee at least your capital back.

It's a Norwich Union investment.

Milarky

This appears to be a new format on the 'guaranteed equity bond' then?

They are simply offering someone else's products [and design] and not a 'straight' 8% bond.

But if it is fixed for 1 year while the bulk of the cash is tied up for five years two questions arise

1) What is the 'rate of return' [2.4% 'guaranteed in first year only plus 70% of growth in stockmarket]

2) What is the likely rate of return in future years? [Do you get your £3192 back at the end of year 1 with four year investment of £7000 or do you have to roll over the cash element into another 4 years?]

Depending on the answers to those sorts of questions, people can begin to exercise some judgement, but isn't it rather annoying that more and more 'packaged' products like this are coming out rather than being straight with customers and asking them to invest directly into shares?

isasmurf

This sounds similar to something Yorkshire Building Society are doing. From what I've been able to read from the big poster in the window (whilst passing on the bus) it pays 7.75% fixed for one year, you then have to transfer the money into some L&G product for 4 or 5 years - the bus never stays still long enough for me to read the rest!

I can't find anything about this on their website, and going into the branch to ask would involve me getting off the bus!

deemy2004

The derbyshires 'safe' bond is 2 year fixed at 5.5%

I was going to go for it just over a week ago when it was 5.7% but they DROPPED the rate !

deemy2004

Yeh

The best one I can see at the moment, is the London Scottish Bank at 5.65% fixed 2 years. Going to go for that one now (in wifes name).

Han_naH

The other issue is how they "sample" the FTSE to give you your "growth in the stock market".

For example, one bond I saw sampled in long intervals. It ignored any gain up to that point, if the market drops before the sample date.

You really need evidence that their tracking system is fairly accurate and regular, else can be a bit of a con.

Tim_L

Guaranteed equity bonds aren't wonderful. Essentially the only benefit they offer is to protect capital against downside risk when investing in equities. Sounds good, but...

1) You can't choose when to get out of the market, so if a fall happens at the wrong time you can't take profits and run. You're locked in for the full term. So the product has all the disadvantages of bonds combined with most of the disadvantages of equity based investment.

2) You don't get dividends. This is a hefty penalty over normal equity investments.

3) You may not get the full gains anyway, as they are usually capped.

4) If there are no gains, you will be losing money at the rate of inflation, say 10% over 5 years minimum. And could be worse. So in fact there is a fairly hefty downside risk.

Bearing in mind that you can currently get over 6% in longish term fixed rate bonds. If capital security is important to your investment strategy, it's probably best to put the cash into bonds, where you can guarantee the return. If you feel equities are going to go up over 5 years, then real equity investments with decent liquidity are a better bet as part of a balanced investment approach (balancing risk against security). But you will need to ensure you keep an eye on performance so you can get out quick if need be.

This should not be construed as financial advice, just personal opinions.

Milarky

The other issue is how they "sample" the FTSE to give you your "growth in the stock market".

For example, one bond I saw sampled in long intervals.  It ignored any gain up to that point, if the market drops before the sample date.

You really need evidence that their tracking system is fairly accurate and regular, else can be a bit of a con.

Harking back to TimL's reply re. alternatives to GEBs, REGULAR SAVINGS are arguably the best way to invest in the FSTE100 or like index. Simply by 'drip' feeding in your money you will get an 'moving avergage' price since units/shares etc will vary from one month to the next. And although it's probably never done in practice, you could equally spread the withdrawals out overa similar period of time.

e.g if you invest £250 for 12 months, stop, wait 3 years and then sell 1/12th of your holding each month you will have been invested in the market for 4 years roughly and the difference between what you have at the end and £3000 is going to be about 1 year's interest on £3000 plus 4 year's 'average' movement in the market.

No capital protection of course but much better than the 'lump sum' approach.