5 August 2019

Questions to ask before you buy any bond

I have a somewhat critical view of rating agencies - they should not be paid by issuers as this could create a conflict of interest. But the regulatory authorities seem to condone this practice.
But if you as a non-professional investor/saver are offered the opportunity to invest in a bond you should ask some basic questions before taking the plunge.
Now with interest rates globally at rock-bottom bonds that offer high interest rates may at first glance look attractive. So ask the following questions:

Who is promoting the bonds? Does the broker/investment bank have skin in the game?
Who is issuing the bonds? Is the issuer guaranteeing the bonds? How long has he been in the business? What is their track record?
If there is collateral or any guarantee - what is behind? Is there a good margin of safety?
What is the maturity of the bond? You may not be able to get your money out before
Especially if there might not be a liquid market in the bonds
Is the bond rated by one of the large rating agencies? As mentioned above, they do have their problems but no rating would be a serious red flag
How high are the fees charged by the issuing/placing agents?
If a Financial Adviser recommends a bond, is he charging a commission from you or the issuer?

Please be aware that this site gives no advice on specific investments but is intended to offer general guidelines for educational purposes. You or your Adviser may have a look at this new offering in order to see how the above suggestions can be applied before you make any investment decision of a similar kind.

A current example of a bond issue would be Urban Exposure Finance Plc 6.50% Secured Notes due 13 August 2026
Urban Exposure launches Sterling Bond

18 July 2019

Fintech Bubblemania is back with a vengeance

Should Joe Public be concerned about these fantasy games that are played with 'valuations'? $3.5 bio for an operation that has a pitiful balance sheet of 150 Mio as per last data I could find. Even if double that it is still ridiculous. And what is the business 'model'? Offering an app and collect deposits? But that is the easy part in banking, if all they then can do is lending it to the wholesale market, mainly other banks, where is the added value? and how much margin is in this 'model'? And the investors that put money into this - and similar start ups - whose money do they look after? It is not their own money but the money that investors - the Joe Public again - have entrusted to them. So any losses are not suffered by the promoters/insiders. The media should be critical and not write adulating reports. And the regulators? Better not say too much, bad for my blood pressure.
On line Bank N26 valued at $3.6 Bio

15 July 2019

Do you know who your ethical fund is backing?

Without specialist help it is easy to fall for catchy advertising. The definition of 'ethical' investing is far from clear and therefore the investment strategies followed by ethical funds are also not necessarily what investors expected.

Should you trust Fund Ratings?

Fund rating firms could be misleading investors by improving the score they give funds in an effort to sell their badge of approval to investment managers. So do not rely blindly on these ratings.

7 April 2019

Get in touch for a free initial consultation - We help you to manage your investment risk, monitor your performance and help you to keep your management fees at an acceptable level. No investment advice on actual investments.
Some of the Problems you may need Help with when investing:
  • Are you suffering from Overconfidence Bias?
  • Performance Fees: Should you pay a fund manager more for doing their job well?

27 March 2019

Expert: Recession is coming - but we don't know when

All too often investors are faced with ambivalent forecasts that are of little use for the management of their portfolios. It is no secret that recessions happen on a regular basis. But when exactly is the next recession going to arrive?
Credit Suisse CIO says a recession is coming

27 November 2018

How to avoid making stupid investing mistakes when the stock market drops

Marketwatch

3 November 2018

Tempted by High-Yielding Bonds?

When you see a promotion for a bond that offers eye-watering returns you have to ask the following questions:
1 - How does the yield compare to rates of comparable issuers?
2 - Is the bond issue rated by one of the top three Rating Agencies (Moody's, Fitch, S&P)?
3 - Who is giving any Guarantee or Insurance?
4 - Is that entity rated?
5 - What is the track record of the promoter?
Experience tells that the ordinary retail investor is in no way capable of giving the right answers to these basic due diligence questions.
Investors are urged to consult a financial adviser with no connection to the issuer or promoter before even considering any investment in bonds.
While many bonds issued by seasoned companies can be sold in a recognised secondary market this could be (extremely) difficult or practically impossible with bonds issued by lesser entities.

Taking Emotion out of your Investment Decisions

Understanding Markets, Company Accounts and Macro Economic and Political factors all are critical for investment success. But your Emotions are an often overlooked aspect that can frustrate the best investment plans, especially when faced by a rollercoaster bear market. And even the most seasoned investment professionals sometimes find it difficult to keep a clear head when bombarded with emotional language by media and market pundits.
How to Take Fear Out of Your Investing Decisions (Barron's, Pay Wall)