Adding Bonds

IMG_20150822_203125Update from Kuala Lumpur, where I am for the next 2 days…

Had to happen.

I am a bond guy after all, when I first started my investment careeer some years ago it was in a boring “bond ladder”, nothing fancy, guaranteed return.

Then times changed, life changed, financial market changed and all of a sudden bonds and fixed income is not a play anymore.

This doesn’t mean that it will not come back in the future (my bet is that it will and it will change the dividend play a LOT), but thanks to some friends who know a LOT more than me, I managed to pinpoint 3 more bonds (corporate), that seem a sensible investment for a portion of the portfolio. Yields are not massive, we are talking 2.5% net at best, but it’s a way to park some cash that right now I do not feel like investing on the market.

The three stocks are a variable rate bond (IT0005120313), a Zero coupon made by GE through its Italian bank (IT0001304010) and a Fiat-Chrysler (XS0305093311) corporate bond.

The former will expire in 2017, so basically I am going to have it for 1 and half years, by then interest rates will be higher (I think) and there will be better opportunities.

Adding some bonds balances the portfolio a little, and provides additional diversification. I really wanted to add some national or world bank bonds to the PF but it’s not possible to find decent returns right now.

Another good point is that from the fist and the last bond I will be recording a capital loss, which I can use to offset some capital gains in the future.

And you out there? Nobody got his hand dirty with some good old bond?

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4 thoughts on “Adding Bonds

  1. I assume you holding on to your bonds till maturity. If they yield 2,5 pct, than that sounds like a reasonable thing to do.

    The cash I do not feel like investing right now is just sitting on a boring savings account. I want to have 100 pct freedom to move it out of there when I see an opportunity.
    A second reason not going into bonds is that I hols bonds via some mutual funds and my branch21 products.

    Kuala Lumpur…. sounds interesting…

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    1. Ciao ATL,

      Yes they will go till maturity for sure. The problem here in Italy is that saving accounts yield is 0.2/0.5% at best… Anyhow lower that net 2%, so I have decided to play it cool and invest the money there after all I have been buying a lot this year as the PF needed to be created. One or two years of relative calm will do me just good… πŸ™‚

      KL is interesting, but I satyed ony 1 day… now moved to Hong Kong… πŸ˜›

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  2. Nothing wrong with adding bonds into the mix of a portfolio. You just don’t read many updates from our DGI community regarding any types of bonds. But I don’t hold that against anyone. While I only hold dividend paying stocks I know many that sell options, own rental real estate, do P2P lending and more. Parking money at 2.5% is not that bad these days either. Thanks for sharing.

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    1. Ciao DH,

      Thanks for stopping by! Well, yes, it seems that corporate bonds (I have bought those in the end) are not very popular in the DGI community. I see the payments as dividends (as a matter of fact I calculate them into the dividend numbers of my PF), they will be reinvested in stocks most probably, so technically the “snowball effect” is still there. Options are too difficult for me at the moment, and the decision to go with very “short term” bonds is to see where interest rates will be in 18 months then decide what to do with the money that I will get in the account when the bonds expire..Ciao and thanks again for posting!

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