All right, there we go: Bonds. Comes up at a "relatively safer" separate asset class in between cash and Stocks. I'm looking at diversifying a bit and thought I should give bonds a hard look before deciding. First, I don't like the idea of investing in debt. I do not like paper investing much either. So I've had a hard time getting to look at bonds. When I look at the aus gov bonds, the returns are ridiculously low: about 2% for a 2 years bonds and 3+% for a 15 years one...thanks but no thanks. Now, I understand there is a secondary market and this is where things could get more interesting. Also I would only consider corporate bonds, as the returns are better. Is any of you invested in bonds? Pros/cons? I've heard "bonds bubble?" - any thoughts? (we do hear everything bubble though...) Thanks guys
I am no expert in bonds.... Having said that, I do have an allocation in my superfund to Australian Bonds. It has been doing well over the time i have had it as the interest rates in Aus have been falling and that has made the value go up. Plus there is income from them as well. This is an index managed by the fund not directly picked by me. I do not know how much longer it will be a good option as as boardsilver suggests if interest rates go up i think the value will go down. In terms of directly investing i do not really have the understanding i need which is why i opted for an index managed by others. there are bond index you can get on the ASX like IAF ILB and IGB but you would have to research how they work and where they are invested because i do not know that info. I have been offered in the past bond issues from banks such as NAB and citibank (i think) but i did not pick them up. They were great yield compared to a cash position but i personally was not keen on an Australian bank exposure for the price. It is certanly an interesting area to research and to try and understand the price action in relation to interest rates and currency fluctuation. I am of the opinion (AND IT IS ONLY AN UNEDUCATED OPINION) that one of the next great calamities will be in United States government bonds and i am mindful that it may hurt australian bonds by default. This is the reason i went for Australian bond exposure only, as well as the less complex currency risk consideration. There is a view for you any way for what it is worth. i would be interested to hear others views on bonds.
Thanks for the replies guys, it pretty much sums up what I was thinking too. I reckon as Willow has pointed out that they have made a great investment so far but I somehow feel the best times are behind us ans as you pointed out I do believe the US bonds to not be worth much once when SHTF. Still keen others' stories if anyone's got any exposure!
I think there is a lot to be said for corporate notes. For example, Tatts Group issued 7-year $100 notes last year, paying "the sum of the 90 day bank bill rate plus a fixed margin of 3.10%". This is currently 6.15%. Being in gambling, with some exclusive licenses, Tatts basically have a license to print money. They are not about to go broke. So you get your capital back in 7 years time.