Recommendations for Bonds

The ‘Allocating your assets’ page shows a defensive portfolio includes 25% cash, 55% bonds and 20% growth. I am 85 and my portfolio is similar, but no bonds – 75% ($600k) term deposits, and 25% ($200k) growth.

I have read your bond tutorial and feel I need bonds. However, your ASX list of bonds seems out of date. Do you have some current recommendations?

Thank you for the excellent Switzer report’s daily dose of financial information.

 

A: Thanks for the question.

 

Firstly, ‘term deposits’’ could be considered to be part of your bond portfolio – it all depends on the maturity (term). Under 6 months, would probably treat in my liquids or cash bucket, but over this period, I would think of them as a bond.

 

Yes, the list I have on that page is not up-to-date – to be honest, I get very few queries on this page – so probably why it has slipped through.

 

Thirdly, how to invest. You have three broad choices:

  1. Buy bonds directly. You can buy treasury bonds on the ASX through your stockbroker ( see http://www.asx.com.au/products/bonds/list-of-agbs.htm) or  alternatively, direct bonds through one of the bond brokers;
  2. Bond exchange trade funds, like iShares Aust Composite Bond Fund – ASX Code IAF;
  3. Managed bond funds.

 

The main considerations are duration and credit risk. Personally, I think bond rates will rise over the medium term, so I am keeping the duration of my bond/fixed interest component pretty short – and am investing in term deposits and hybrids.

 

Hope this helps


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