Is buying debt to hold till maturity pretty safe?

[nosolution]

Hi Guys,

I've had money in equities for a few years now and have done pretty well. I managed to get in right about at the bottom (all luck at that point). And have made a decent return. I currently have shares in TWR FBU NZX and MCK(bad buy but doesn't seem to be going anywhere and pays dividends of a bit more than a savings account). I also carry about a 3rd of my portfolio in a PIE call account.

However, interest rates are crap right now, and I'd really like to be making more than what I am with my call account. I am planing to start a business around 2.5 years from now and most of this portfolio will need to be liquidated in order to do that. So I'm willing to take on some risk, but I can't take on too much beacause I need to be able to take all the capital out and don't want to take a big hit when I do.

What can you guys recomend for the cash I currently have in the call account? Debt securities interest me but I haven't traded in them before. Would buying a few bonds of various risks and returns that mature within my 2.5 year time frame make sense? I would love to hear your thoughts on my portfolio as a whole, and what moves I should be making.

Thanks,

Noso

[kiwitrev]

Hi Noso
Just on the bonds part of your post you might consider IFT060, maturity 15/9/13. These would fit into your time frame. I am holding these, coupon of 8.5% with quarterly interest payments. You can't trade bonds on-line, have to contact your broker. I use ASB Securities, brokerage 0.05%. In my view the only question one needs to consider (like any other trade) is the soundness of the company. You may already be familiar with Infratil, they are a large coy with diversified infrasructure assets. Most of their debt is via debt securites and have several currently on issue with a new one planned for June. IFT060 is an uncomplicated bond, no tricky stuff. As you intend to hold until maturity any movement in interest rates (upward) will not be of concern. If you wan't some info. on IFT bonds go to their website www.infratil.com Best of luck.

[Enumerate]

Have a look at the BLU020 thread for an extreme risk/reward situation.

[GTM 3442]

Hi Noso
. . . . . You can't trade bonds on-line, have to contact your broker. I use ASB Securities, brokerage 0.05%. . . . .

Only some bonds can't be traded online - the likes of BNZ, Westpac, etc. Have been trading IFT/FBU etc online with Direct Broking for years now.

[Newman]

STL030 bonds (mature on 15/3/2011) even more reward/risk than BLU020.

[Enumerate]

STL030 bonds (mature on 15/3/2011) even more reward/risk than BLU020.

Not really .... On the reward side of the equation: with STL030 you are paying about 65 cents for a dollar. BLU020, you pay about 35 cents for a dollar bond plus about 30 cents accrued interest.

On the risk side: well ... this is where you have to do your own homework.

[Waiuta]

The new issue for Genesis could be worth looking at over your timeframe. Details are a bit sketchy at present but should be more transparent by next week.

[tobo]

Hey, Nosolution, what did you end up doing?
Interested to see how your decisions have panned out so far. Did you stick with fixed interest?

[kiwi2]

Hi No Solution,
I also have a large call account sitting getting low interst. (4%).
Been thinking about bonds.

Have no plans as such for the money except the interest return to live on, so can hold to maturity.

Happy to use a broker...but would prefer to do own thing.

How do you go about buying a bond say issed by a bank eg ANZ do you contact the bank ?

Can you give me an update of what you ended up doing ? How has it worked out.

Thanks.

[Dej]

I would also be interested to know how you got along, havent really got into the bond market, but it has some healthy returns it seems and am just starting to research them now!