Corporate Bonds - Calgarypuck Forums - The Unofficial Calgary Flames Fan Community

SeeGeeWhy · 01-13-2009, 05:47 PM

Has anyone ever purchased corporate bonds before? Do you have to be an institutional investor, or can Joe Everyman buy into them if someone like McDonalds is issuing debt?

Finner · 01-13-2009, 06:11 PM

Joe Everyman can buy corporate bonds. On most online trading sites you can purchase them. In fact I have no idea why anyone buys GIC's and make 2 percent when you can pick up a TD or Bell bond that pays 5 percent. Especially if you're young.

Nancy · 01-13-2009, 06:50 PM

A GIC is practically risk free; a corporate bond is not. (Check out LQD, the corporate bond ETF to see what I mean.) Whether or not you think that risk is worth the extra premium is an individual decision.

When buying bonds, the minimum face value purchase is typically $5000, but you can get around this by buying strip bonds or non-interest paying bonds, e.g. strips/coupons/residuals (which you buy at a steep discount to face value and you make your money off of capital gains.)

On Investorline, you'd go under "Fixed Income" and then select either Quick Picks or one of the inventory searches.

Bonds are not a sure thing. You can lose money on bonds if prevailing interest rates go up.

SeeGeeWhy · 01-13-2009, 07:34 PM

That's true nancy, but what are your thoughts on this if you plan on holding the bond to maturity?

Nancy · 01-13-2009, 08:19 PM

Quote:

Originally Posted by SeeGeeWhy

That's true nancy, but what are your thoughts on this if you plan on holding the bond to maturity?

If you sell you lose money, if you hold on, you lose out on making money.

EDIT: Forgot to mention that, nonetheless, I have been a big fan of bonds and have at least 1/3 of my portfolio in them.

Slava · 01-13-2009, 08:43 PM

Its a way to "insure" your portfolio though if you buy a strip bond, hold it to maturity and invest the premium you make into equities. Your worst case scenario is break-even...and obviously you are hoping that the equities rise in value over this period!

I-Hate-Hulse · 01-13-2009, 09:03 PM

I wanted exposure to bonds in my portfolio but decided that buying bonds one off was going to take more time than I had to give. So I bought a decently performing bond mutual fund with exposure to high quality corporate bonds and govt bonds.

It's been the star performer in my portfolio this year.

Slava · 01-13-2009, 09:08 PM

Quote:

Originally Posted by I-Hate-Hulse

I wanted exposure to bonds in my portfolio but decided that buying bonds one off was going to take more time than I had to give. So I bought a decently performing bond mutual fund with exposure to high quality corporate bonds and govt bonds.

It's been the star performer in my portfolio this year.

I think that no matter your view on mutual funds a good bond fund is a decent way to go. The fees are generally pretty low, and bond managers are worth the tiny bit extra.

I have a number of clients that we invested into bonds this year and they are positive through the worst of this upheaval (portfolio-wise). Its like Buffett says "stocks always outperform bonds, except when they don't."

macker · 01-13-2009, 11:28 PM

Manulife, BCE, Enbridge are all offering corporates in the 6-8% range for relatively short term holding periods! In this market some of your portfolio should be positioned in the take what you can get segment. Also RBC, TD, BMO and National Bank have all issued fairly attractive preferred shares in the last month or two. I would still favor the corporate bonds though. You can get Government, Corporates or Municipal bonds through E-trade, Questrade or bank owned discount brokerages.

corporatejay · 01-14-2009, 12:08 AM

Government Bonds have a worse interest rate than an high-interest on-line savings account.

Nancy · 01-14-2009, 07:23 AM

Quote:

Originally Posted by corporatejay

Government Bonds have a worse interest rate than an high-interest on-line savings account.

There are the kiddy Canada Savings Bonds that you can buy at the bank, and then there are the real bonds. You can also buy provincials. The yield on a Saskatchewan bond is about 4.5%.

I-Hate-Hulse · 01-14-2009, 10:17 AM

Quote:

Originally Posted by macker

Also RBC, TD, BMO and National Bank have all issued fairly attractive preferred shares in the last month or two. I would still favor the corporate bonds though.

Note that these are rate reset prefs, and I had to do some googling to find out exactly what this entailed..

http://network.nationalpost.com/np/b...big-thing.aspx

@theCBE · 01-14-2009, 10:18 AM

I hear you can get some Nortel bonds pretty cheap today.

MoneyGuy · 01-14-2009, 10:41 AM

I buy corporate bonds through funds. I think corp bonds are a good bet right now for someone who is lower risk. Not as low risk as government bonds but lower risk than stocks. Corp bonds are less sensitive to interest rates than government bonds, and the potential for capital appreciation is there as well. HOwever, I'm not a big fan of bonds and I'm buying stocks. I see bonds as a risk reducer, not necessarily to give a portfolio some umpff.

SeeGeeWhy · 01-14-2009, 11:45 AM

Yep, I am interested in balancing my overall portfolio with these instruments when I finally have my "unemployment" nest egg built and start earning on my private equity holdings (likely not for a while).

I am realizing that it doesn't make sense for me to be hugely invested in equity, and then hold all of my "employee contributions" and other future savings in high risk instruments (equities, mutual funds, etc). That, and GICs are pretty lame - to me the high interest savings accounts have marginalized that option, unless you've got more than the amount insured to invest into low risk, low return instruments.

MoneyGuy · 01-14-2009, 12:22 PM

Quote:

Originally Posted by SeeGeeWhy

....I am realizing that it doesn't make sense for me to be hugely invested in equity, and then hold all of my "employee contributions" and other future savings in high risk instruments (equities, mutual funds, etc). ....

If you mean equities, why not? If you're young, have lots of years and don't mind volatility, why not be buying as much as you can when prices are really low? There are some Chicken Littles here but I`m not one of them. This market will come back and the investments made at lows like this will be the ones that give the best capital appreciation. When this market reaches bottom (I think we`re close), I feel that will be the best investment opportunity you`ll see for a long time. Hey, I`m probably older than you are and that`s what I`m doing.

mykalberta · 01-14-2009, 12:25 PM

I own some GE bonds, those are the only corp bonds I own.

pepper24 · 01-14-2009, 01:14 PM

I've added a few corporate bonds to my portfolio over the past year which has turned out ok considering the current market. My worry though is a corporate bond bubble so I am closely watching.

I agree with Money Guy's post about the perfect opportunity to buy equity especially if you're young, 35 years old or less. It'll be tough to time a bottom but if you were to buy a few shares of solid companies now and gradually top up these positions over the next few months I don't see how you can lose over the long run. Mutual funds are another option but be careful about MER costs and greasy advisors who get paid on commission. I'd stick with low cost index funds focused on the CDN, US and international equity markets as not many funds beat the market and use dollar cost averaging (buying fractions over time) to spread out risk.

Slava · 01-14-2009, 01:34 PM

Quote:

Originally Posted by pepper24

I've added a few corporate bonds to my portfolio over the past year which has turned out ok considering the current market. My worry though is a corporate bond bubble so I am closely watching.

I agree with Money Guy's post about the perfect opportunity to buy equity especially if you're young, 35 years old or less. It'll be tough to time a bottom but if you were to buy a few shares of solid companies now and gradually top up these positions over the next few months I don't see how you can lose over the long run. Mutual funds are another option but be careful about MER costs and greasy advisors who get paid on commission. I'd stick with low cost index funds focused on the CDN, US and international equity markets as not many funds beat the market and use dollar cost averaging (buying fractions over time) to spread out risk.

I hope that you meant to have green font on that part....

SeeGeeWhy · 01-14-2009, 01:55 PM

Quote:

Originally Posted by MoneyGuy

If you mean equities, why not? If you're young, have lots of years and don't mind volatility, why not be buying as much as you can when prices are really low? There are some Chicken Littles here but I`m not one of them. This market will come back and the investments made at lows like this will be the ones that give the best capital appreciation. When this market reaches bottom (I think we`re close), I feel that will be the best investment opportunity you`ll see for a long time. Hey, I`m probably older than you are and that`s what I`m doing.

I already have a substantial amount invested in equities. Sure, they are the shares of a private company, but I still count that as high risk/high reward.