Author Topic: Bonds and general advice... I'm so confused  (Read 1239 times)

Kaminoge

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Bonds and general advice... I'm so confused
« on: September 15, 2018, 03:14:03 AM »
Hi All,

This is probably a very ignorant question but after a lot of googling I decided it was just easiest to come and ask.

I'm Australian.

I have been a very lazy investor over the years (fortunately with a naturally stingy bent so I've always saved - just with no plan) and I've ended up very heavily invested in property (which apparently is a common Australian thing to do).

I'm trying to get myself on track to balance things out a bit more. Done some reading and wanting to go for a couch potato style of portfolio. And that requires me to have some bonds. The catch is I can't figure out how one actually acquires bonds. Is buying a bond ETF the same thing? If I bought VGB (Vanguard Australian Government Bond ETF) is that the way to get bonds in my portfolio? Would it matter that I only had Australian Government bonds as the bond part of the portfolio? I have no idea if I'll end up in Australia long term (I've spent less than 2 years here in the last 20 years although I'm here on a 6 month break right now which is why I'm trying to get myself financially sorted).

All advice and answers appreciated but please keep them really simple...it's a steep learning curve (book recommendations are also welcome).

Thanks!

LAGuy

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Re: Bonds and general advice... I'm so confused
« Reply #1 on: September 15, 2018, 07:38:29 AM »
Yeah, buying a bond ETF would cover you. If at all possible, try not to limit yourself to Australian bonds. You want something like BND if at all possible. Australia has a rather volatile currency that's heavily influenced by the winds of change in commodities markets.

Andy R

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Re: Bonds and general advice... I'm so confused
« Reply #2 on: September 15, 2018, 09:25:17 AM »
If you are not sure where you will end up living in retirement, then an all-world unhedged bond might be better than an Australian bond or even Australian domciled international bond index which will be hedged to the AUD.
I was looking for this for a while since I am also unsure where I will be retiring to and just came across AGGG on the LSE.
https://www.ishares.com/uk/individual/en/products/291773/ishares-global-aggregate-bond-ucits-etf-usd-dist-fund
I believe with IB there is no problem buying ETF's on other exchanges such as LSE,

Not sure if its suitable, I just found it myself.

Kaminoge

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Re: Bonds and general advice... I'm so confused
« Reply #3 on: September 15, 2018, 04:41:44 PM »
Thanks. It's good to know that bond ETFs do the trick. I'll see if I can find some other bonds listed that aren't Australian Government. Thanks for the site Andy R.

steveo

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Re: Bonds and general advice... I'm so confused
« Reply #4 on: September 17, 2018, 05:30:09 PM »
I use VAF. It's only a small percentage of my portfolio (10%).

Goldielocks

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Re: Bonds and general advice... I'm so confused
« Reply #5 on: September 17, 2018, 05:36:51 PM »
Thanks. It's good to know that bond ETFs do the trick. I'll see if I can find some other bonds listed that aren't Australian Government. Thanks for the site Andy R.


Please also research strategies for BOND LADDERS... and Preferred shares.

Bond ladders -- you hold the bonds directly, instead of in a pooled index fund.  Pooled funds can go down over the short  to mid term, as interest rates rise.
I like Bond Ladders for people building a long term strategy for annual payouts, guaranteed.   Bond index funds are a nicer for improved liquidity if you are holding them as a place to keep cash for asset allocation rebalancing.

Preferred Shares - depending on your risk, these shares pay out to their holders AFTER the bonds pay out, but BEFORE the general stock dividends are paid out.  Also have a higher order of protection if the company fails. 

PizzaSteve

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Re: Bonds and general advice... I'm so confused
« Reply #6 on: September 18, 2018, 10:11:16 AM »
Your choice seems sensible for an Australian spending auzzie dollars.