Simplicity bond fund

(I wasn't quite sure which forum this belongs into)

Has anyone invested in the new Simplicity bond funds? they seem like a low cost great approach, but I would love to know other's thought? Please note these are not kiwisaver funds.

https://simplicity.kiwi/investment-funds/funds#nzbond
https://simplicitykiwi-assets.s3.us-...-June-2019.pdf

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Originally Posted by nzspeak

(I wasn't quite sure which forum this belongs into)

Has anyone invested in the new Simplicity bond funds? they seem like a low cost great approach, but I would love to know other's thought? Please note these are not kiwisaver funds.

https://simplicity.kiwi/investment-funds/funds#nzbond
https://simplicitykiwi-assets.s3.us-...-June-2019.pdf

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I can't speak for these particular investment funds. What i'm more concerned about is their 'claimed returns' if they're audited? Also when they mention before taxes - that also doesn't tell much of the story because we all know income from interest sources such as from bonds, are subjected to RWT.

As we live in an environment where fixed interest returns are heading to 0% - i'm hearing far too many (seniors?) that are squirming because they're not getting the returns like they use to. The low rates that the banks offer today makes these people compelled to looking for higher returns elsewhere - without factoring the risk involved. I would say it's the exact opposite of the times when interest rates are very high - the era of SCF and Hanover Finance where many mom & pop and pensioners invested into them thinking the extra 1/2% to 1% more than what the banks were paying, would make all the world of difference.

So they've been scared back to banks and then now, they're going to repeat the same mistakes like a merry-go-round.

I invested $20 K since June this year (3 months) in Simplicity NZ bond fund - returns so far +3% after tax (28%) and fees.

Fees are in single digits so far! $2.5 monthly fee ($30 per year) and 0.1% management fee

My kiwisaver is with Simplicity too (switched to balanced fund recently)

SBQ - please look at their bond portfolio - mostly NZ govt bonds

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Originally Posted by RRR

SBQ - please look at their bond portfolio - mostly NZ govt bonds

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It's actually a better option than the term deposit market, as local currency denominated Government Debt has no credit risk, whereas bank deposits do.

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Originally Posted by RRR

I invested $20 K since June this year (3 months) in Simplicity NZ bond fund - returns so far +3% after tax (28%) and fees.

Fees are in single digits so far! $2.5 monthly fee ($30 per year) and 0.1% management fee

My kiwisaver is with Simplicity too (switched to balanced fund recently)

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3% net in 3 months? That's 12% per year return after tax? Too good to be true.

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Originally Posted by SBQ

3% net in 3 months? That's 12% per year return after tax? Too good to be true.

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I will try to explain. Bond funds invest in bonds (obviously) and the returns are interest paid by the bonds and the capital gain (or loss) of the bonds (if any).

When interest rate goes down bond prices generally go up (capital gain) and that is what happened recently (RBNZ lowered interest rates). The returns are not linear (but much less volatile)

I hope that makes sense. My investments are predominantly in shares.

Discl - not associated with simplicity

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Originally Posted by RRR

I will try to explain. Bond funds invest in bonds (obviously) and the returns are interest paid by the bonds and the capital gain (or loss) of the bonds (if any).

When interest rate goes down bond prices generally go up (capital gain) and that is what happened recently (RBNZ lowered interest rates). The returns are not linear (but much less volatile)

I hope that makes sense. My investments are predominantly in shares.

Discl - not associated with simplicity

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Don't forget the realized capital gains from sales. Done properly, this can add a couple of percent to the return, while acting to reduce duration risk.