View Full Version : Unit Trust vs Bonds
What is the difference between unit trust and bonds? After buying, can we withdraw within a certain time frame?
Both are designed to suck money and purchasing power out of you :scared-5:
Both are designed to suck money and purchasing power out of you :scared-5:
Is there a grace period for you to think over it after buying?
Is there a grace period for you to think over it after buying?
I have just checked with the banker, the grace period is 7 days.
Best is don't touch these types of 'investments'. Only the middle man makes $, for the rest of the investors they just are just playing casino or losing out in terms of low yield of the bonds.
Unit Trusts - useless, might as well buy the stocks directly without need to pay 2-3% management fees every year and the 2-5% sales charge!
Bonds - An important part of any rich investors' portfolios.
What is the difference between unit trust and bonds? After buying, can we withdraw within a certain time frame?
Unit Trusts - useless, might as well buy the stocks directly without need to pay 2-3% management fees every year and the 2-5% sales charge!
Bonds - An important part of any rich investors' portfolios.
But how, I have already bought $10k from UOB unit trust and the banker told me that the fund will be given to Prudential to buy USA & Asian bonds, dividend 0.4% per month, so 1 yr is 5% but no guarantee. No lock in period, can sell anytime at market value. Admin charges 4%. If I want to cancel, don't know whether still can make it or not as I bought it on Monday.
But how, I have already bought $10k from UOB unit trust and the banker told me that the fund will be given to Prudential to buy USA & Asian bonds, dividend 0.4% per month, so 1 yr is 5% but no guarantee. No lock in period, can sell anytime at market value. Admin charges 4%. If I want to cancel, don't know whether still can make it or not as I bought it on Monday.
These guys usually pay you well in the 1st year only. 5% yield in 1 year now is too good to be true.
These guys usually pay you well in the 1st year only. 5% yield in 1 year now is too good to be true.
They have 2 choices, dividend to be paid out in monthly or yearly. My banker advises me to take up the monthly dividend, so that I need not wait till year end to collect my dividend. He gave me a chart showing from Yr 2005 till Sep 2011, dividend was paid out regularly at 0.4% monthly except in Jan, it was 0.6%. But he emphasizes that dividend is not guarantee, it depends on the performance of the market. He said that they will try to distribute dividends because if no dividends, then everybody will start to draw out the money since there is no lock-in period, if this case happen, they will be in big trouble.
Bond waste time lah.
Especially now with interest rates so low.
When rates start going up, price of the bonds will go down and start losing capital value.
I'll be sticking to equties
Bond waste time lah.
Especially now with interest rates so low.
When rates start going up, price of the bonds will go down and start losing capital value.
I'll be sticking to equties
In Yr 2008, I bought a unit trust which was tied to equities from one of the banks. There is a lock-in period of 4.5 yrs. The admin charges was 4.5%. The banker told me that I can get 7.5% dividend. That was my first time buying a unit trust, not much knowledge about it. In the end, I only got $1+ dividend for my 1st yr and till now no dividend at all. :banghead: But luckily this unit trust is principle guaranteed. So after it matured, I will sell it away and get back my principle amount.:D
Then u still buy again ?
Prudential, I have a prudential bond yielding over 9% ! When AIG was in trouble, prudential was not much better.
I agree with teddybear, should not go into unit trusts. U r PAYing someone else to GAMBLE for you. If I were to gamble ( invest in ### market), I will gamble myself.
Bonds are basically IOUs. So many of them. Choosing just like choosing shares. No free lunch. But very very often the market present some opportunities. For example capitaland bond yields more than 10% during 2009. A company's share can go to 0, its bond will not unless it defaults. so cases like this is very good opportunity. The only issue is, most bond entry point is high. The said CAPL bond is 250k a piece. As of now some top name European banks and insurers bond yields over 9%. U make ur choice. If you dare to buy a unit trust ran by prudential to get a "potential yield", I might as well look for its bond that yields similar rate.
Then u still buy again ?
Prudential, I have a prudential bond yielding over 9% ! When AIG was in trouble, prudential was not much better.
I agree with teddybear, should not go into unit trusts. U r PAYing someone else to GAMBLE for you. If I were to gamble ( invest in ### market), I will gamble myself.
Bonds are basically IOUs. So many of them. Choosing just like choosing shares. No free lunch. But very very often the market present some opportunities. For example capitaland bond yields more than 10% during 2009. A company's share can go to 0, its bond will not unless it defaults. so cases like this is very good opportunity. The only issue is, most bond entry point is high. The said CAPL bond is 250k a piece. As of now some top name European banks and insurers bond yields over 9%. U make ur choice. If you dare to buy a unit trust ran by prudential to get a "potential yield", I might as well look for its bond that yields similar rate.
That's why I'm thinking whether should I cancel or not, the grace period is 7 days. I bought it on Monday. Don't know whether is it 7 working days or 7 calendar days.
The problem is I never play share before. I just got back my matured deposit and do not know where should I invest in order to have more interest as the saving account interest is so low. I cannot tie up the cash for too long, as I just bought a ppty, waiting for them to call up for payment.
A company's share can go to 0, its bond will not unless it defaults.
Most companies will not be doing very well in the next few years. How can they give so much returns? I would say it is quite difficult to spot the gems.
Most companies will not be doing very well in the next few years. How can they give so much returns? I would say it is quite difficult to spot the gems.
.... Hmmm not sure fully understand your question... It's in fact during bad times you will see corporate bonds yielding 8/9% ....
.... Hmmm not sure fully understand your question... It's in fact during bad times you will see corporate bonds yielding 8/9% ....
I think it could be that during bad times, they need more money, so the only way is to give you "sweet sweet" to attract more investors, then they will have more money to turn around.
The banker told me that they invest in 600 companies, so it couldn't be that all these 600 companies also have problem, if that is the case, then it will be the end of the world. :sleep:
I think it could be that during bad times, they need more money, so the only way is to give you "sweet sweet" to attract more investors, then they will have more money to turn around.
No no no. Ok I see what the confusion comes. No it's not the corporate that issues bond during down time which will carry high yield. It's the EXISTING bonds of these companies (whose yields nominally 3 to 5%) being traded at a much higher yield ( think traded way below par)
The banker told me that they invest in 600 companies, so it couldn't be that all these 600 companies also have problem, if that is the case, then it will be the end of the world. :sleep:
it's not that. What if "they" themselves default ? Like AIG, whatever obligation they hold against u is just an outstanding debt when doing bankcrupcy. The world may not end, but they end. So if you already believe they will not default, then if you can buy their own debt at 8%, why would you buy a fund ran by them which COULD "potentially" yield 8% non guananteed, and at the same time PAYING them to play with your money ? ;) I hold the prudential bond. Tis bond yields 9%. Prudential better work hard to fulfill its bond obligation by selling more of this kind of funds to public to make more fees. See so different. Prudential needs to beg me not I beg them.
devilplate
07-11-11, 10:11
Unit trust is simpler and easier and smaller bite sizefor retail investors mah....
5k is all u nid to buy UT
Unit Trusts is designed for small investors - and put the latter at an even more disadvantage than direct stocks' investors. :beats-me-man:
Unit trust is simpler and easier and smaller bite sizefor retail investors mah....
5k is all u nid to buy UT
.... Hmmm not sure fully understand your question... It's in fact during bad times you will see corporate bonds yielding 8/9% ....
During the older "bad" times, not all economies are doing badly. Investment returns from other parts of the world still doing well can be used to pay investors. Now most of the economies are not doing well simultaneously. How to get such returns now? The maths doesn't add up. I believe the investors need to take "haircuts" later.
...Now most of the economies are not doing well simultaneously. How to get such returns now? The maths doesn't add up. I believe the investors need to take "haircuts" later.
I still dun understand your point. Did you see what I wrote on the bond yields during distress times ? It has nothing to do with returns of the company. It's an IOU. If the company does not go bust, it must pay its debt. I dun believe Capitaland will default no matter what happens, therefore I bought its bond with yield more than 8%. CAPL can make a loss on this financial year or next, but as bond holder as long I hold the bond through maturity my return is fixed. Of courses if I need to sell the bond for cash I will have to take a prevailing haircut too, however for me bonds are for holding for yields not for trading. As long as I hold the bond there is no impact for me.
Yes as Teddybear and devil pointed out, bonds are not for small time players. Entry point is high.
I'm not into bonds. From layman's perspective. Interest rate from banks is so low, y shd a company pay so much more to borrow at 8%?
Because the banks didn't want to lend to the company because of perceived higher risks, hence company has to borrow at higher %age from other investors! Where got low risk and high %age yield bonds when banks interest so low? Wait long long. :beats-me-man:
I'm not into bonds. From layman's perspective. Interest rate from banks is so low, y shd a company pay so much more to borrow at 8%?
Even the greedy banks also don't want to lend to the GLCs at 8%? :confused:
I need to clarify the 8% returns is over how many years. If it is compounded over 5 years, then per annum return rate is actually much lower.
Because banks can get >8% yield in other bonds?:D
I'm not into bonds. From layman's perspective. Interest rate from banks is so low, y shd a company pay so much more to borrow at 8%?
ok let me give u a simple primer.
The corporate does not pay more interests.
Math test:
Capitaland issues a bond in 2007 , coupon rate 5%. Matured in 2017.
In 2009, market down, ppl were selling this said capitaland bond because they were scared. You were not scared. You bought the bond at $60, for a nominal bond par value, or face value of $100.
Now nothing changes as far as capitaland is concerned. It's still paying 5% bond coupon. But for u, what's the yield for you ?
devilplate
08-11-11, 19:00
ok let me give u a simple primer.
The corporate does not pay more interests.
Math test:
Capitaland issues a bond in 2007 , coupon rate 5%. Matured in 2017.
In 2009, market down, ppl were selling this said capitaland bond because they were scared. You were not scared. You bought the bond at $60, for a nominal bond par value, or face value of $100.
Now nothing changes as far as capitaland is concerned. It's still paying 5% bond coupon. But for u, what's the yield for you ?
vy kind of u to provide explanation...hehe
Btw, is corporate bond better or preferential shares? Tks
ok let me give u a simple primer.
The corporate does not pay more interests.
Math test:
Capitaland issues a bond in 2007 , coupon rate 5%. Matured in 2017.
In 2009, market down, ppl were selling this said capitaland bond because they were scared. You were not scared. You bought the bond at $60, for a nominal bond par value, or face value of $100.
Now nothing changes as far as capitaland is concerned. It's still paying 5% bond coupon. But for u, what's the yield for you ?
So ur 8% is bcoz of fire sale. Hmm... I recall e interest rate at tt time was quite high.
vy kind of u to provide explanation...hehe
Btw, is corporate bond better or preferential shares? Tks
I went down to the bank again just now. The banker told me that if the company is in trouble, they will pay the bond holders first, then preferential shareholders and lastly is the shareholders.
Actually, when the company is in deep trouble (if books cooked or derivatives exploded), nobody will get paid - regardless of bond holders, pref shares holders, or shares holders. :banghead:
I went down to the bank again just now. The banker told me that if the company is in trouble, they will pay the bond holders first, then preferential shareholders and lastly is the shareholders.
devilplate
08-11-11, 20:09
I went down to the bank again just now. The banker told me that if the company is in trouble, they will pay the bond holders first, then preferential shareholders and lastly is the shareholders.
er....tot shd be pay bond holders den shareholder and den lastly pref....
I had nvr bot any bonds or pref shares.....seriously looking into it now....
Still got firesale anot? Hehe
Now still have so good rates meh? I think it is well below inflation rate, especially those issued by government. http://www.sgs.gov.sg/
When a corporate defaults, for sure shareholder gets nothing. All bond holders sit there to observe recovery rate first. Then depending it's senior debt or junior debt ("subordinated") each get a priority queue. Senior bond holder does not mean u get paid what your are owed. You can have plenty of senior holders who are at the same rank as you. You will get what's recovered and proportioned out to you. This is really a lengthy process.
Devil pref share's coupon is conditional upon the share itself paying a dividend. If the share scraps the dividend for the year, pref shares will not get any coupon. Tis can happen easily, for example BP cancels dividend to pay for the gulf damage, Soc Gen just declared scrap of 2011 dividend because of Greek loss. In this regard bond is definitely better than pref shares, as the coupon on a bond is unconditional. Btw I think pref share rank the same as subordinate bond.
Hyenergix for sovereign debt, if a country is good, no way u can get high yield. SGS no way u can get any high yield. Look at Italy . Its bonds are yielding pretty high now. Do u dare ? I already told u some big name European banks and insurers have bonds traded almost at distress level. Do you dare ?
For capitaland specifically, interesting thing is, the share drops a lot, but it's bond hardly moved. I means the market dun believe this company will have any real trouble. Unlike 2009, when the share drops to $2, plenty of ppl really thought it will become junk, and can't wait to offload for cash.
Btw as Teddy mentioned, during down time, some desperate corporates had to raise funds by issuing high yield bonds. They are begging investor for money. You must have the faith this company will not go bust to enter. To be honest, you do have some real good names issuing high yield bonds. When the market is in panic mode, everything is possible. GE issues a note to Warren Buffet at 9% is a good example. As of today, you can take a look at how much HP borrows at. You will be very surprised. This market is full of irregularities, especially at a volatile moment like this.
When a corporate defaults, for sure shareholder gets nothing. All bond holders sit there to observe recovery rate first. Then depending it's senior debt or junior debt ("subordinated") each get a priority queue. Senior bond holder does not mean u get paid what your are owed. You can have plenty of senior holders who are at the same rank as you. You will get what's recovered and proportioned out to you. This is really a lengthy process.
Devil pref share's coupon is conditional upon the share itself paying a dividend. If the share scraps the dividend for the year, pref shares will not get any coupon. Tis can happen easily, for example BP cancels dividend to pay for the gulf damage, Soc Gen just declared scrap of 2011 dividend because of Greek loss. In this regard bond is definitely better than pref shares, as the coupon on a bond is unconditional. Btw I think pref share rank the same as subordinate bond.
Hyenergix for sovereign debt, if a country is good, no way u can get high yield. SGS no way u can get any high yield. Look at Italy . Its bonds are yielding pretty high now. Do u dare ? I already told u some big name European banks and insurers have bonds traded almost at distress level. Do you dare ?
For capitaland specifically, interesting thing is, the share drops a lot, but it's bond hardly moved. I means the market dun believe this company will have any real trouble. Unlike 2009, when the share drops to $2, plenty of ppl really thought it will become junk, and can't wait to offload for cash.
Capitaland is doing well? Really?
Capitaland is doing well? Really?
I did not say CAPL is doing well.
I said CAPL bond holder is not selling its bonds in distress level like in 2009. Therefore CAPL bonds today are still traded "per normal".
(btw I also did not say CAPL is doing badly either ;) Its balance sheet is very complicated)
Capitaland has so much cash infusion and mis-directed expenditures in local and overseas projects...
I suppose the normal level you are referring to is about 3-4% from the article below.
http://www.asiaone.com/Business/News/My+Money/Story/A1Story20100818-232726.html
At this level and investment quantum, property is much better as a building cannot disappear like a company can, and you can enjoy both rental gain and capital appreciation.
er....tot shd be pay bond holders den shareholder and den lastly pref....
I had nvr bot any bonds or pref shares.....seriously looking into it now....
Still got firesale anot? Hehe
The banker told me that because shareholders have the say, so they will be the last one to be paid.
BTW, the one that I mentioned earlier is actually a unit trust. The bank helps the "Asset Management Company" to collect the money and in turn this "Company" will use the investors money to buy USA & Asian bonds, maybe some equities too. They will then paid out a dividend of about 0.4% monthly or 5% yearly.
I have checked their historical record, even during 2007/2008 crisis, they still pay out the same dividend.
Anyway, the min amount is $10k for a monthly dividend and $1k for a yearly dividend. But the dividend and principal amount are not guaranteed. The banker advises me to keep the unit trust for at least 1 to 2.5 yrs, because if the dividend is paid out promptly (lets say 5%), then your admin charges will be recovered, followed that will be your extra income and you can also sell anytime if the market is good but the up and down is not much. Currently, the bank only charge you admin charges (3-5% depending on the amt you invest) when you buy but when you sell, there is no admin charges.
I have not bought preference share before, also looking into it but the banker told me that now the preferene share is quite high, not worth buying leh. Should go in during Aug time when the price is low. But I heard that Preference Share has a life span of 10 yrs.
devilplate
09-11-11, 21:29
I buy UT via fundsupermart
The banker told me that because shareholders have the say, so they will be the last one to be paid.
BTW, the one that I mentioned earlier is actually a unit trust. The bank helps the "Asset Management Company" to collect the money and in turn this "Company" will use the investors money to buy USA & Asian bonds, maybe some equities too. They will then paid out a dividend of about 0.4% monthly or 5% yearly.
I have checked their historical record, even during 2007/2008 crisis, they still pay out the same dividend.
Anyway, the min amount is $10k for a monthly dividend and $1k for a yearly dividend. But the dividend and principal amount are not guaranteed. The banker advises me to keep the unit trust for at least 1 to 2.5 yrs, because if the dividend is paid out promptly (lets say 5%), then your admin charges will be recovered, followed that will be your extra income and you can also sell anytime if the market is good but the up and down is not much. Currently, the bank only charge you admin charges (3-5% depending on the amt you invest) when you buy but when you sell, there is no admin charges.
I have not bought preference share before, also looking into it but the banker told me that now the preferene share is quite high, not worth buying leh. Should go in during Aug time when the price is low. But I heard that Preference Share has a life span of 10 yrs.
B careful of pyramid scheme.
I buy UT via fundsupermart
I bought PRU Monthly Income Plan M. Now it is below par value.
devilplate
09-11-11, 21:42
I bought PRU Monthly Income Plan M. Now it is below par value.
The sales charge is one of the lowest.....u take a look lor...
B careful of pyramid scheme.
Thank you but I doubt so as this involves the banks, I only know that UOB and Maybank offers the same type of unit trust, not sure about other banks.
The sales charge is one of the lowest.....u take a look lor...
Which plan are you referring, mine or yours?
Thank you but I doubt so as this involves the banks, I only know that UOB and Maybank offers the same type of unit trust, not sure about other banks.
Y do u trust e banks? Heard of high notes?
Y do u trust e banks? Heard of high notes?
Yes, I trust the bank, that's why I put all my money in the bank, buying their structured deposit or maybe 10 yrs saving/insurance plan etc with capital guaranteed. I'm not a risk taker, so don't know much about shares and high notes or bonds. I lend them money to let them play for me, in return I get back some interest. That's why I never get rich, haha.
devilplate
09-11-11, 22:04
Which plan are you referring, mine or yours?
its not a plan la...hehe
They r a trading hse....u buy sell thru them....hehe
its not a plan la...hehe
They r a trading hse....u buy sell thru them....hehe
Ya lor, that's why I said, I have limited knowledge on all these, aiyoh, so "pai say".:ashamed1:
These strange financial instruments can generate so high yield even in this market? Very dubious unless you know how they generate the returns. I wouldn't dare to touch them at all. Even big banks here have to send their loan agents running hard around the showrooms to earn that measly 1% interest.
If u r still curious abt where high yield bonds come about, as of now, OLAM has a bond traded above 9% yield. Due 2020. This is a local company u can identify with.
... Note I'm not recommending anything. Just to show u there are plenty of opportunities around.
Are these done in parcels of 250k? 9% is decent for a 10 yr corp bond
Tend to be illiquid and very big spreads...not for everyone
If u r still curious abt where high yield bonds come about, as of now, OLAM has a bond traded above 9% yield. Due 2020. This is a local company u can identify with.
... Note I'm not recommending anything. Just to show u there are plenty of opportunities around.
If u r still curious abt where high yield bonds come about, as of now, OLAM has a bond traded above 9% yield. Due 2020. This is a local company u can identify with.
... Note I'm not recommending anything. Just to show u there are plenty of opportunities around.
Thanks for the tips. I went to its website and the closest I can find due 2020 is 7.5% http://www.olamonline.com/publications_and_presentations/circulars_and_prospectus. By the way it is dominated in US dollars, and there is a high risk of forex in 2020. In another words, it gains every time there is a QE and bond holders lose.
Of course there are risks involved. I merely give u a live example of high yield corporate bond, since u seem to think high yield bond can only happen in "firesale". The fact is, high yield corp bonds are always possible in many environment.
Btw abt fx, ever occured to u u can fund urself in USD too? Libor is so low, u practically can borrow at 2% on left hand and buy this bond at 9% with right hand. (a simplified example though..)
Look there are 2 categories for bond investment. Steady but low and safe is one, non steady and high but not safe is another. There is no free lunch. Dun always look at exceptional yields. A steady 5% is more than sufficient.
The reason I bring up this bond yield topic is mainly because I want to point out there are other investment vehicles for yield, other than rent. in this forum, IMHO too much emphasis had been placed on rental values of pty investments. My point is, for the sole purpose of yield, there are other (IMO) better assets, as long as u are not looking at super high yields.
Of course there are risks involved. I merely give u a live example of high yield corporate bond, since u seem to think high yield bond can only happen in "firesale". The fact is, high yield corp bonds are always possible in many environment.
Btw abt fx, ever occured to u u can fund urself in USD too? Libor is so low, u practically can borrow at 2% on left hand and buy this bond at 9% with right hand. (a simplified example though..)
Look there are 2 categories for bond investment. Steady but low and safe is one, non steady and high but not safe is another. There is no free lunch. Dun always look at exceptional yields. A steady 5% is more than sufficient.
The reason I bring up this bond yield topic is mainly because I want to point out there are other investment vehicles for yield, other than rent. in this forum, IMHO too much emphasis had been placed on rental values of pty investments. My point is, for the sole purpose of yield, there are other (IMO) better assets, as long as u are not looking at super high yields.
10 years is too long a horizon for me to invest in a company, as it can disappear overnight without a trace. A house cannot disappear and it can be used by the owner.
I rather hold that phyiscal properties at traditional 3% yield (actually not really 3% because I have shown that it is actually 8-12% with respect to cash outlay!) than these papers called high-yield bonds at 9% yield. They give you so high yield for taking low risk? Who so stupid? I scare the next morning I wake up those bonds papers can throw into fire because useless & value! :scared-1:
Of course there are risks involved. I merely give u a live example of high yield corporate bond, since u seem to think high yield bond can only happen in "firesale". The fact is, high yield corp bonds are always possible in many environment.
Btw abt fx, ever occured to u u can fund urself in USD too? Libor is so low, u practically can borrow at 2% on left hand and buy this bond at 9% with right hand. (a simplified example though..)
Look there are 2 categories for bond investment. Steady but low and safe is one, non steady and high but not safe is another. There is no free lunch. Dun always look at exceptional yields. A steady 5% is more than sufficient.
The reason I bring up this bond yield topic is mainly because I want to point out there are other investment vehicles for yield, other than rent. in this forum, IMHO too much emphasis had been placed on rental values of pty investments. My point is, for the sole purpose of yield, there are other (IMO) better assets, as long as u are not looking at super high yields.
devilplate
17-11-11, 21:12
i aso dare not buy such bonds.....spread too huge.....easy to buy....hard to sell.....hold till maturity abit too long also.....
furthermore, no capital gain so to speak if u hold till maturity
ppty is not just abt rental yield of coz....imagine u buy a ppty and u noe 10yrs later prices will remain the same ......will u still buy for rental yield? surely no lor....hehe
Last fri one CAPL bond traded close to 5%. In case u r watching... SGD 5% steady yield , worthwhile to consider
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