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.

[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.

[Enumerate]

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

[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.

[BIRMANBOY]

You can buy fixed interest securities, bonds etc on the open market see below link https://www.directbroking.co.nz/Dire...ratesheet.aspx

Best to do some research yourself...if you use DB you can call them and they are quite helpful with explaining. The major thing is be aware that stated rate of interest is going to be constant (unless its a perpetual) but ACTUAL yield is determined by how much of a premium (or discount) that you have to pay to buy on open market. Alternatively IFT is getting ready to place a new bond

Issuer Details
Issuer Name:	Infratil Limited
Key Dates
Opening Date:	23/04/2013
Closing Date:	27/06/2013
Issue
Coupon Rate:	6.85% p.a.
Minimum Investment:	$5,000 and in multiples of $1,000 thereafter
Amount Sought:	$25m with up to $75m of oversubscriptions.
Details
Infratil Limited ("Infratil") has registered a Simplified Disclosure Prospectus for an offer of Infrastructure Bonds. The new Infrastructure Bonds have a maturity date of 15 June 2022 and will pay a fixed rate of interest at 6.85%p.a. Interest will be paid quarterly. Infratil Infrastructure Bonds are unsecured, unsubordinated debt securities of Infratil. Unlike each series of Infrastructure Bonds issued prior to November 2011, the Infrastructure Bonds offered under this prospectus are not convertible into shares in Infratil in any circumstances. Infratil is a holding company with investments in the infrastructure companies that are described in the Simplified Disclosure Prospectus. Prospective investors should refer to the Simplified Disclosure Prospectus to fully understand the status of the Infrastructure Bonds and the terms and conditions of the offer. For more information or to request a copy of the Simplified Disclosure Prospectus, when made available, please contact the Direct Broking Fixed Interest Team on FREEPHONE 0800 800 372 or you can request a copy of the Simplified Disclosure Prospectus by providing your details below. Disclosures and Statements ANZ New Zealand Securities Limited will be paid commission of up to 1.25% of the application amount on all applications that are accepted by the registry bearing the Direct Broking "stamp". No fees are payable by the applicant on successful applications. ANZ Bank New Zealand Limited is a joint manager of the issue.

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.