The opening up of the retail bond market is very good news for investors, as if you and I. Bonds are basically personal debt securities which a company promises to pay you a normal interest for borrowing money from you. Hopefully more blue chip corporates will start tapping into this section and not simply focusing on the high net worth private bank market.
The Perennial bonds was a good example in which a 3-year bond offering produce of 4.65% were oversubscribed by 4x with strong demand from retail investors! I nicknamed her “bond gal” (without her knowledge or acceptance). She uses her savings and bonus to buy bonds in a disciplined manner, ensuing in the fact that she has maintained to build up a sizable asset base now.
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250,000 but still, I admire her perseverance to achieve that. Creating passive income from retail bonds portfolio? A calendar year and pay back the principal at maturity Most bonds pay coupons twice. 120,000 bond portfolios that pays a coupon each and every month from the next year onwards. You now repeat that process over an extended period of time and you will build a bond portfolio that will care for your preferences. Whether you prefer bonds or not depends on what your location is in your daily life cycle?
Different people go through life cycles at different factors in time. I really do acknowledge that I never like bonds while I was much younger. Individuals who have been following my blog know I’ve a higher risk appetite. I spend money on unlisted pre-IPO companies and punt IPO stocks and shares. I invest, or trade in stocks and shares but when someone mention bonds, I’ll sweep it apart as saying the produce is too low usually.
Not sure how it’ll perform post-IPO as I am under moratorium. I will blog this entire tale another time. The opening up of the retail bond market changed my view as I no more need to set aside a princely outlay each time. How the wealthy play the bonds game? I didn’t actually want to blog much on this but if you think they are happy with the yield, it’s not true.
The rich will need leverage (through the private bank or investment company) on the ranked bonds for 80% of the worthiness and gained a levered return from their bonds investment. As such, a rated connection rather than yielding 3% may produce up to 6-8% via leverage. I hope the retail market deepens. MAS has been wanting to start the retail market and perhaps we can even see a Temasek retail connection soon? However, don’t expect a higher interest payout from a AAA-rated bonds.
I am not heading to kid one to say it is without risk. Let’s take a good example of Ezra bonds trading below its par value now. If it can refinance its bonds or pay back them at maturity, no issue then. The unrealized loss is temporal. If it can’t pay back its debt, then the company will be in default and that will spell trouble for everyone traders as well. That is why some collateral traders monitor the credit scores of the ongoing company very carefully.