Passive / low cost, bond / fixed interest funds

[peat]

The Financial Planning profession are not guilty here. I made the decision to get out of my UK share fund into a 'safer' UK bond fund all by myself :-(.

It wasn't quite as bad as I made it sound though. That money was only a small part of the capital...

SNOOPY

Thanks for the acknowledgements Snoopy - so in effect you were following the lines of significant diversification as financial planners would suggest.

There are still plenty of people out there with financial plans saying allocate 30% of assets to NZ shares 20% to overseas shares 30% to NZ bonds and 20% to overseas bonds, or something like that. So they blindly do it. I believe that in NZ, where there are several boring shares that pay high dividends you will get a much greater income stream for not much more risk than having so much in a traditional bond portfolio. This logic is even more compelling since the GFC.

You're right in that the risk perception of bonds has changed. A lot more sovereign bonds are seen as fallible these days.
The thing is with bonds the risk is very variable depending on the issuer , the type and the duration - clearly in a fund you are relying on the manager to be appropriate to the stated goals and risk profile of the prospectus.

[nextbigthing]

Does anybody know of a reputable bond on offer at the moment that's paying a healthy rate of interest?

Preferably NZ

NBT

[CJ]

Does anybody know of a reputable bond on offer at the moment that's paying a healthy rate of interest?

Preferably NZ

NBT

Whats a healthy rate of interest?

Chch is offering soon but it will be in the 5's I think?

Edit: It should have read Christchurch Airport and the minimum is 6.25%

[nextbigthing]

Whats a healthy rate of interest?

Chch is offering soon but it will be in the 5's I think?

Edit: It should have read Christchurch Airport and the minimum is 6.25%

Interesting. Thanks CJ will keep an eye out for that one.

What's a healthy rate of interest? Well... IMHO some pretty solid companies on the NZX pay 8-9% dividends so I'd say somewhere round here?

[BIRMANBOY]

I would suggest you spend a little time researching bonds and also do some checking on the NZ fixed interest portion on either DB or ASB. The basic facts are that when interest rates are low as they are (at moment) most of the bonds are also low. Why? The companies are borrowing money and will pay as little as they can (to us). If they could borrow the money cheaper they would so the rates are always set as a compromise...has to be attractive in comparison to other investment options so they get takers ...but certainly not so much that they get themselves in trouble paying it back. Any company offering the rates you are looking for would be a very dodgy exercise......extremely attractive of course...but you know what they say abould too good to be true. The most recent one I have was INFRATIL IFT190 which came to market paying 6.85% . You can buy this on market say for 10,000 worth at 9870.46 plus accrued interest 28.23 plus brokerage of 54.99 for total of 9953.68. So you have a bond paying 6.85% of 10,000 on an investment of 9953.68 which equates to a gross return before tax of 6.88%. Thats just one example...now the thing to remember is this bond has a life to 2022. If interest rates go up your options are going to be selling on open market at a loss to your original cost or holding till maturity or another option if its in the small print..... Bonds require considerable knowledge...I'm not saying I have it...but I am saying they require some time and effort in coming to terms with the plus and minus

Interesting. Thanks CJ will keep an eye out for that one.

What's a healthy rate of interest? Well... IMHO some pretty solid companies on the NZX pay 8-9% dividends so I'd say somewhere round here?

[nextbigthing]

Thanks Birmanboy. It's a work in progress

[born2invest]

Does anybody know of a reputable bond on offer at the moment that's paying a healthy rate of interest?

Preferably NZ

NBT

Take your pick...

APM010	15/03/2016	11.30%
TWC010	15/04/2014	7.40%
UOC010	15/12/2014	7.10%
IFT190	15/06/2022	7.05%
IFT090	15/02/2020	6.80%
IFT180	15/11/2018	6.30%
IFT160	15/06/2017	6.25%
TPW110	15/09/2019	6.20%
ZEL030	15/11/2019	6.20%
IFT170	15/11/2017	5.95%
FBI120	15/03/2019	5.90%
ZEL020	15/08/2018	5.85%
FBI110	15/03/2018	5.80%
AIA120	13/12/2019	5.60%
IFT150	15/06/2016	5.60%
VCT070	15/06/2017	5.60%
WIA010	15/11/2013	5.50%
FBI070	15/05/2016	5.40%
AQN010	1/04/2019	5.35%
FBI100	15/03/2017	5.35%
IFT070	15/11/2015	5.35%
TPW070	15/12/2015	5.30%
AIR010	15/11/2016	5.25%
PWC090	28/09/2017	5.25%
TPW060	15/03/2014	5.25%
SKC030	15/05/2015	5.24%
TRP010	30/11/2018	5.24%
TPW090	15/12/2016	5.20%
TRP020	6/09/2019	5.20%
GFZ010	16/05/2016	5.19%
MEL020	16/03/2017	5.15%
FBI060	15/05/2016	5.10%
FBI090	15/03/2015	5.10%
TPW100	15/12/2017	5.10%
ZEL010	15/10/2016	5.10%
AIA110	17/10/2017	5.00%
FBI050	15/05/2014	5.00%
NZP010	15/11/1939	4.90%
AKC060	18/12/2018	4.85%
WHS010	15/06/2015	4.85%
AIA080	15/11/2016	4.80%
AKC050	29/09/2017	4.75%
GOV410	15/04/2023	4.73%
TPW080	15/12/2014	4.65%
GOV390	15/05/2021	4.55%
TCN550	15/06/2015	4.50%
TCN490	22/03/2016	4.45%
PWC060	29/06/2015	4.35%
GOV400	15/03/2019	4.26%
GMB010	19/06/2015	4.25%
TCN520	15/06/2015	4.25%
FCG020	4/03/2016	4.20%
AIA070	7/11/2015	4.16%
VCT050	15/10/2014	4.15%
CEN010	15/05/2014	4.00%
MEL010	16/03/2015	4.00%
GOV380	15/12/2017	3.93%
FCG010	10/03/2015	3.88%
AKC040	15/09/2015	3.76%
AKC020	24/03/2015	3.64%
AIA100	27/11/2014	3.60%
AIA090	28/02/2014	3.27%
ANB080	9/06/2014	3.25%
GOV360	15/04/2015	3.02%
AKC010	24/03/2014	2.93%
GOV290	15/02/2016	1.77%