Corporate Bond Unit Trusts

[penbat1]

They usually give better returns than deposit accounts (up to 10% pr annum) and i have never heard of them going negative so why bother with deposit accounts ?

[Killer Bunny]

They usually give better returns than deposit accounts (up to 10% pr annum) and i have never heard of them going negative so why bother with deposit accounts ?

Is this a joke?

If not, and you are a regular on this site, don't you realise that companies are at risk and so will be their debt.

Corp bonds are a pile of sh1t.

[Numani]

A certain points in the economic cycle corporate bonds offer a great reward/risk trade off.

Right now you are unlikely to get much more than the coupon back with the possibility of capital losses. why?

we are without a doubt nearing the end of a great run of performance. Even the average fund delivered some meaningful cash + returns over the last few years.

Now corporate debt deafults have bottomed out and expected to rise.

Spreads are historically tight compared to Gilts/Bonds. Most of the previous strong performance came from spread compression.

[penbat1]

A certain points in the economic cycle corporate bonds offer a great reward/risk trade off.

Right now you are unlikely to get much more than the coupon back with the possibility of capital losses. why?

we are without a doubt nearing the end of a great run of performance. Even the average fund delivered some meaningful cash + returns over the last few years.

Now corporate debt deafults have bottomed out and expected to rise.

Spreads are historically tight compared to Gilts/Bonds. Most of the previous strong performance came from spread compression.

Whats your view of them as a long term investment, say 10 years, which includes at least one complete economic cycle ?

[Killer Bunny]

A certain points in the economic cycle corporate bonds offer a great reward/risk trade off.

Right now you are unlikely to get much more than the coupon back with the possibility of capital losses. why?

we are without a doubt nearing the end of a great run of performance. Even the average fund delivered some meaningful cash + returns over the last few years.

Now corporate debt deafults have bottomed out and expected to rise.

Spreads are historically tight compared to Gilts/Bonds. Most of the previous strong performance came from spread compression.

As I said sh1t

But you did it beautifully. I did it somewhat less technically.

[Numani]

Whats your view of them as a long term investment, say 10 years, which includes at least one complete economic cycle ?

One can not take a ten year view on this asset class.

All that matters is now and what you could reasonably see potentially happening ahead.

you could buy now. inflation rears its ugly head. Interest rates/ gilt yields go up.

Corporate bond yields irrespective of credit ratings go higher - immediate capital losses - maybe two years incomes worth.

[Too expensive to trade up]

Whats your view of them as a long term investment, say 10 years, which includes at least one complete economic cycle ?

That's like saying I'm buying a house now because in 10 years time It'll be worth more. On a releated front the Halifax were selling these as a 'safe' investment about two years ago. They were advertised as a deposit account but with more interest. I was not happy when I saw this. In the past I've invested in high-yielding shares in boring companies such as utilites instead of bonds.

Edited November 11, 2005 by Too expensive to trade up

[penbat1]

That's like saying I'm buying a house now because in 10 years time It'll be worth more. On a releated front the Halifax were selling these as a 'safe' investment about two years ago. They were advertised as a deposit account but with more interest. I was not happy when I saw this. In the past I've invested in high-yielding shares in boring companies such as utilites instead of bonds.

Yup The Halifax are flogging them like crazy: http://www.thisismoney.co.uk/investing-and...37&in_page_id=3

[nobody]

They usually give better returns than deposit accounts (up to 10% pr annum) and i have never heard of them going negative so why bother with deposit accounts ?

Bonds which give you 10% pa are Junk Bonds and your capital is at a high risk.

I've had a mini ISA of a respectable corporate bond for about 4 years and even in the ISA wrapper (where they can still reclaim tax credits on dividends) it has yielded about 6% pa less the inflationary erosion of my capital. i.e. I've had the income but the bonds could be sold for not much more than I bought them.

[penbat1]

Bonds which give you 10% pa are Junk Bonds and your capital is at a high risk.

I've had a mini ISA of a respectable corporate bond for about 4 years and even in the ISA wrapper (where they can still reclaim tax credits on dividends) it has yielded about 6% pa less the inflationary erosion of my capital. i.e. I've had the income but the bonds could be sold for not much more than I bought them.

I take your point about junk bonds but the inflation issue also applies to deposit accounts.