How To Buy & Invest In Bonds In Australia: A Beginner's Guide

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People want to know how to buy and invest in bonds in Australia.

 

Bonds are low-risk secure debt securities issued by governments and large corporations.

 

They provide a stable source of income, help diversify your investment portfolio and protect your hard-earned money from the volatile market.

 

It is what makes them quite an attractive investment option among investors. If you want to buy and invest in bonds in Australia, you have come to the right place.

 

This blog discusses the different types of bonds and ways to invest in them. It also answers some of the most commonly asked questions, including how bonds work, how to buy bonds, if it is worth it, and much more.

 

 

1. What Are Bonds?

 

Bonds are safe investments used by governments and companies to finance projects and operations. 

 

Investing in bonds is lending money to a government or a company to receive regular interest payments after an agreed time. These are called coupon payments.

 

When you buy a bond, it includes details such as the total loan amount you must repay to the bond owner and how much interest will be payable to the bond owner on an incremental basis.

 

Such regular interest payments provide a continuous stream of income that you can use to create a diversified portfolio.

 

The return on your investment may be lower than you expect from investing in stocks, but they offer more stability. That's why bonds are an attractive investment option and a strategic asset for your portfolio, particularly in times of falling interest rates or market volatility.

 

 

2. How Do Bonds Work?

 

Investors lend money to a company or a government for a fixed period at a pre-determined interest rate. All bonds come with a fixed value, called "face value" when issued to the lender.

 

Government bonds in Australia generally make regular interest payments to the bond owners during the bond term and repay their principal amount on the 'maturity date' of the bonds.

 

Investors can sell their bonds before the maturity date, but in that case, they will get the market value, which could be lower than the face value or principal of the bond.

 

For example, if you purchase a 10-year $10,000 bond that pays 3% interest from a mining company, the company will make periodic interest payments on the $10,000 and return the entire principal in 10 years.

 

The price of a bond may fluctuate due to four main factors:

 

  • The interest rate

  • And the credit rating of the issuing company (if the credit rating improves, then the bond price will rise, and vice versa)

  • The level of liquidity

  • When the bond is due to be repaid 

 

Skilled bond traders try to gain from price movements by actively trading bonds on the bond markets.

 

 

3. What Are The Different Types Of Bonds?

 

The Australian government and corporations are the main issuing entities in Australia for bonds.

 

The Commonwealth of Australia issues Commonwealth Government Bonds, or Commonwealth Government Securities, which pay a lower interest rate than corporate bonds in Australia as they involve fewer risks.

 

 

Here is a Collection of The Different Bonds You Can Buy in Australia:  

 

 

Government-Issued Commonwealth Government Securities

 

You can buy these in various ways: through the ASX, directly over the counter, through a broker, or with an online trading account.

 

The face value and the interest rate of this type of bond remain fixed, and payments are made every 3 to 6 months over the bond term.

 

There are different types of Australian Government Bonds: 

 

  • Treasury Bonds in Australia: These are medium to long-term debt securities that pay interest every six months at a fixed rate. On maturity, the investors receive the face value of the bond. You can trade them on the Australian Securities Exchange at market value.

 

  • Treasury Indexed Bonds: Like Treasury Bonds, these are medium to long-term bonds, where the capital value is adjusted for movements in the Consumer Price Index that measure inflation. Investors get the interest each quarter at a fixed rate and the capital value of the bond on maturity.

 

  • Semi-Government Bonds: These semi-sovereign debts are issued by Australian territories and states. You can buy or sell them only through state and territory treasury corporations.

 

 

Corporate Bonds

 

Companies issue these bonds to raise money from investors to finance their business activities. You can trade them on the over-the-counter (OTC) market.

 

Although they offer higher interest rates, growing companies are riskier than government entities. It is necessary to check the credit risk of corporate bonds before buying them.

 

The minimum amount of funds you need to buy corporate bonds is higher and can be around $500,000.

 

 

Sustainable Bonds

 

You can also find many bonds through superannuation, wholesale markets, and exchange-traded funds. They work the same way as common bonds but are primarily used to fund sustainable projects.

 

 

Bond ETFs

 

They are available on the ASX and are accessible with an online share trading account. Investing in a bond ETF implies investing in a fund that tracks the bond market (corporate or government bonds) and imitates its returns

 

Bond ETFs pay interest monthly, and you receive the capital gains as a yearly dividend.

 

 

4. How Do You Buy ASX Bonds in Australia?

 

There are several ways to access the bond market in Australia. You can buy bonds listed on ASX in the following ways:

 

 

  • Exchange-Traded Funds (ETFs) or Exchange-Traded Bonds: You can buy or sell them on a stock exchange via a full-service broker or an online trading platform.

 

  • Bond ETFs: This is an exchange-traded fund comprising a set of securities listed on a stock exchange. Bond ETFs generally track an index or a bundle of bonds to replicate its returns. Hybrid bond ETFs are riskier than other derivatives, so research before investing in them.

 

  • Exchange-Traded Corporate Bonds: An exchange-traded bond unit relates to a single corporate bond listed on ASX. It mirrors a specific underlying bond and provides expectable dates (coupons), income amounts, and fixed maturity dates before investing. Presently, there are 50 XTBs that you can trade on the ASX with a minimum of $500.

 

  • Exchange-Traded Government Bonds on ASX: These bonds track government bonds and provide fixed interest returns for the security term. However, as the interest rate gets adjusted with the Consumer Price index, the interest you receive may change periodically.

 

 

 

5. Steps For Beginners To Invest In Bonds In Australia

 

 

Step 1: Study The Bonds Before Investing

 

You must have an investment strategy and know the terms used during its execution. Some of these terms include: 

 

  • Accrued interest

  • Basis points

  • Bid/ask

  • Clean price

  • Coupon rate

  • Duration

  • Market price

  • Nominal value

  • Par

  • Premium and discount bonds

  • Yield to maturity

 

Beginners can take an Australian Government bonds course that introduces them to exchange-traded Australian Government bonds and teach about how bonds work and their importance in their portfolio.

 

 

Step 2: Identify The Right Bond For Investment

 

Next, you must decide what type of bond you want to invest in.

 

Investors can invest in Bond Funds or Bond ETFs. It is the relatively easiest and cheapest way to access the bond market.

 

You can buy and sell bonds on a stock exchange via a full-service broker or an online trading platform.

 

 

Invest In Bonds via CFDs

 

CFD investors seek to gain from upward or downward bond price movements in the futures market.

 

However, these complex derivative products can be risky and are most suited to advanced traders.

 

 

6. What Is The Best Time To Buy Bonds?

 

Usually, investors like to invest in bonds when an economy performs well, and inflationary pressures and interest rates tend to build up. It puts pressure on yields, causes them to increase, and the bond value tends to fall.

 

Likewise, they tend to sell their bond units when the economy cools, and interest rates fall, leading to a bond price increase.

 

However, some investors invest in bonds when an economy doesn’t perform well. Such investors start shifting their investment from the stock market to bonds to protect their capital. They prefer lower but guaranteed returns to take risky bets in the stock market.

 

Experts recommend understanding the economic cycle beside the factors that drive the yields up or down to decide the correct entry and exit time in bonds, debt funds, or hybrid funds.

 

 

7. Is Buying Bonds A Good Idea?

 

Bonds come in a variety of types. Out of all, Government bonds are one of the safest investment options, as no Australian government has defaulted on its debt. (Past performance does not guarantee future results.)

 

Investing in these defensive assets gives you a wide range of benefits, such as:

 

  • Less volatility makes it potentially a safer investment

  • Provides a stable and predictable revenue stream

  • Choosing bonds to diversify a part of your portfolio can help reduce your financial risk.

 

Buying bonds is an excellent option for risk-averse people who aren’t after huge returns and want a comparatively safer and stable investment option. Bonds can help you gain returns without much exposure to unwanted market volatility.

 

It is ideal for retired people or those entering retirement or already retired who prefer a more stable income stream to support their lifestyle.

 

Additionally, those heavily invested in stocks can consider buying bonds to rebalance their portfolio to average their financial risks/returns.

 

 

8. How Much Money Do You Need To Invest In Bonds?

 

Unlike stocks, you need an initial amount of money to start investing in bonds. 

 

So, how much do you need to start investing? Many bonds come with a face value of $1000, so buying one bond unit on the Australian Stock Exchange is equivalent to $100.

 

On the other hand, the minimum amount needed to purchase corporate bonds is usually large, up to $500,000.

 

 

9. Compare Online Brokers To Invest In Bonds

 

With so many brokers available online, it often becomes confusing to find the best one from them.

 

We have compared top Online Brokers in Australia based on vital parameters to ease your selection.

 

Broker Name Brokerage on ETFs Inactivity Fee Markets Served
IG Share Trading $8 No ASX shares, US shares, UK shares, ETFs, and more
CMC Markets Invest $0 No ASX shares, Global shares, mFunds, ETFs
Tiger Brokers $6.49 No ASX shares, Global shares, Options trading, US shares, ETFs

 

 

10. Are Bonds a Good Investment in Australia?

 

Bonds are potentially safer investment options but have pros and cons:

 

 

Pros

 

  • Less volatility 

  • Provide Predictable and stable income

  • Offer diversification and reduces financial risks 

  • Carries low-risk, mainly Australian government bonds due to Australia's credit rating

  • Higher returns than savings

 

 

Cons

 

  • Required to wait until the maturity date

  • Long-maturity bonds are prone to Interest rate risk.

  • Bond issuer (the Federal government, a corporation, or a municipality) defaults can risk your principal and interest payments.

  • Due to a broker's involvement in buying and selling bonds, there is uncertainty about whether the price you pay or get for bonds is fair.

  • Considerably lower return on investment than other riskier financial assets

  • Less frequent Interest payments

  • High investment amount requirements

 

 

Investing in Bonds Can Help in The Below Scenarios:

 

  • If you are a risk-averse investor and want to reduce the possibility of losing money. In that case, bonds might be a suitable investment. Bond prices remain reasonably stable, so they offer a lot safer store of value than stocks. However, remember that your potential return is lower due to low risks.

  • Bonds could be a good choice if you are heavily invested in stocks and want to diversify your portfolio with debt assets. While helping in portfolio diversification, it also reduces the volatility of your portfolio's performance. 

  • If you are retired or nearing retirement, shifting your portfolio towards bonds rather than shares can help you get a more stable revenue stream to support your lifestyle. 

 

 

11. Is There A Better Investment Than Bonds?

 

Continue reading to discover how bonds stack up against alternative investment choices:

 

 

Bonds vs. Stocks

 

Bonds are ideal for investors who are conservative and nearing retirement age. They have low-risk levels and offer reliable, fixed, and consistent returns.

 

On the other hand, stocks are suited for people who can handle market risks, have more time to achieve their goals, and want higher investment growth. Stock investments usually offer more potential for growth, and you can weather market fluctuations if you stay invested for the long term.

 

You may opt for a target date fund if you still can't decide which one to consider. It invests your capital in bonds and stocks based on your risk tolerance and investment goals.

 

If you are young, the target date fund invests a significant chunk of your capital in stocks. The fund becomes more conservative as you near your retirement and shifts your equity allocation to bonds. It provides portfolio diversification, so they are suited for passive, hands-off investors.

 

 

Bonds vs. Term Deposits

 

Both bonds and term deposits are safer investment options offering stable, consistent, and predetermined returns to investors.

 

In both cases, you need to park your money for a certain period; however, compared to the maturity period, term deposits usually come with a shorter term ranging from 6 months to 5 years. This makes term deposits more suitable for short-term and long-term goals.

 

Additionally, if we compare their investment returns, term deposits usually give investors a better return (refer to the above table). As the interest rate gets locked initially, your investment value stays intact throughout the term deposit duration.

 

This isn't with bonds whose value can diminish during the "term" in events of inflation and interest rate hikes.

 

 

Bond vs. Bond ETFs

 

While bonds are held as a single security with the government, corporate, or financial institution, ETFs comprise a set of debt assets or bonds. A Bond ETF generally offers better risk-adjusted returns at low prices than individual bonds.

 

While investing in individual bonds is expensive, investors can buy bond ETFs and build their portfolios at smaller investments.

 

Furthermore, bonds come with a coupon and a fixed maturity date. At the same time, Bond ETFs don't have a maturity date but pay dividends as per the received coupons in the strategy or re-invest them at the current market price.

 

 

Bond ETFs vs. Bond Funds

 

Both invest in a basket of debt instruments or bonds. The fund manager actively manages the combined income of investors and is allocated to various securities.

 

Bond ETFs are cheaper than mutual funds and track an index of bonds to imitate the returns from the underlying index. As bond mutual funds offer more choices, they are ideal for investors looking for active management.

 

Only investors who want to hold their investments for the long term should consider bond mutual funds as high transaction costs could make frequent buying and selling expensive. In that case, bond ETFs are ideal due to their low fee.

 

Which is a better investment depends on individual financial condition, investment capital, investment horizon, short-term and long-term financial goals, and risk tolerance. Speaking to a financial advisor is beneficial for finding the best investment option.

 

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

 

 

12. Is It Smart To Put Money in Bonds?

 

No one investment option suits everyone. This goes with bonds too. Whether bonds are an ideal investment depends on age, risk-taking capacity, investment amount, investment timespan, and investment goals.

 

However, considering global uncertainties induced by the worldwide recession, the coronavirus pandemic, and war, most retail investors are flocking to fixed-income investments.

 

They are getting smarter by switching to bonds that offer them safe and fixed returns while riding through the recent high uncertainty and volatility in the stock market.

 

Thus, bonds are a wise investment choice for retail investors:

 

  • Who look for a steady source of income instead of riding on the rollercoaster of equity investment. 

  • Who prefer stable predetermined returns that can help them predict what their nest egg will appear at a specific point. 

  • With low-risk tolerance 

  • Prefer safe investment options and capital preservation over uncertain investment avenues with substantial potential returns.

 

The table below gives you better clarity on whether bonds are a wise investment choice:

 

Advantages of Bond Investment Drawbacks of Bond Investment
  • Modest and consistent returns on investment
  • Issuer default in making repayments
  • Relatively safer than other investment options (especially government-backed Tripe A bonds)
  • The decline in the bond value due to interest rate hike
  • High-quality bonds act as a hedge against inflation.
  • Prepayment Risk
  • Offer Protection against price swings during economic turbulence.
  • Lower returns compared to other investment instruments. Not for investors looking for 10-11% ROI and afford to take some risks.
  • Better returns than a savings account or Certificate of Deposit
 
  • Great to diversify your equity portfolio as they help preserve your portfolio value when stocks fail to perform
   
   
  • Ideal for long-term goals like building a retirement corpus
   
   

 

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

 

 

13. Frequently Asked Questions (FAQs)

 

 

Which Type of Bonds Are The Most Popular?

 

In Australia, there are three main types of Fixed Income Securities you can trade on the ASX:

 

  • Australian Government Bonds

  • Corporate Bonds

  • Hybrid Securities

 

As each type of bond has its sellers, buyers, objectives, and levels of risk and returns potential, it is necessary to compare options carefully before making a decision.

 

 

How Do You Trade In Bonds in Australia?

 

Investing in exchange-traded Australian government bonds on the ASX is straightforward. You can do it through a financial adviser, a stockbroker, or an online share trading account

 

The ASX provides a complete list of all government bonds - Treasury bonds and Treasury-indexed bonds that are available for trading on the ASX. 

 

Some bonds are not publicly traded, and you can only buy them over the counter. You can purchase them wholesale. You will have to engage a broker to execute your trades on your behalf (in exchange for a brokerage fee).

 

It often requires a more considerable minimum investment (over $500,000).

 

 

What Happens if Bonds Crash?

 

The main trigger for a bond market crash is inflation, which causes the central government to hike interest rates for the short term to control inflation. A bond market crash often happens after low-interest rates and high bond prices.

 

The result of a bond market crash is a short-term drastic decrease in the bond price. If the rate hike continues to happen, the bond's value will decline further. Though it is unfavourable for existing bondholders, new investors can buy newly issued bonds at lower prices and make more money.

 

To what extent can a bond price decline? The bond's duration measures the degree of bond price fluctuation concerning an interest rate change. Generally, a one percentage point difference in interest rate causes the bond price to shift in the opposite direction to its duration number.

 

For instance, a one percentage point increase in interest rates can cause a 10-year bond to a 10% decline in its price.

 

 

Is There A Downside To Bonds?

 

Bonds are a defensive asset but also carries risk such as:

 

  • The main risk is the “Credit Risk/Default Risk” when the issuer goes solvent and fails to pay the interest owed to its investors. The chance of default is minimal in the case of government bonds and high in the case of corporate bonds.

 

  • Another type of risk is “Interest rate risk”, as a rising interest rate causes the bond value to decline. As bonds have long maturities, there is a risk that the interest rates may rise before the maturity of the bond. Not only does it reduce the value of your bond, but holding it for a long may deprive you of earning a higher interest rate in any other investment instrument.

 

  • Lack of transparency: Dealing in a bond market requires you to engage a third party, like a broker, to execute your trades. Due to this, you are less confident of the price you receive or pay for your bonds. 

 

 

What Is The Australian Government Bonds Calculator?

 

The ASX bond calculator computes bond prices and yields for standard fixed-interest and exchange-traded Australian Government Bonds.

 

It helps users calculate the yield to maturity of different AGBs from the traded price, thereby assisting people in determining which AGB is the most attractive investment for their needs.

 

Once you enter the yield or market price for your selected AGB into the calculator, the calculator will produce the following:

 

  • The market price depends on the yield to maturity

  • Yield to maturity depending on the market price

  • Clean price. (market price - accrued interest)

  • Accumulated interest

 

 

Can You Invest In Bonds In Australia? 

 

Yes, there are multiple mediums you can use to buy a bond in Australia. These include:

 

  • Buying directly over the counter

  • Through the ASX

  • Through a broker

  • Using an online trading account

 

 

Do Bonds Pay Monthly?

 

Most bond funds, like bond ETFs, pay regular monthly payments, but the amount may differ based on the market conditions.

 

 

How Do You Trade Bonds To Make Money?

 

Here are the two simple ways you can use to make money from bonds:

 

  • Hold onto the bonds till their maturity and collect the coupon payments. This way, you will receive your initial investment and the profit as “interest” you gained monthly/quarterly/annually during the bond tenure.

 

  • Buy them at a low price, and sell them at a price higher than what you initially paid. 

 

 

How To Buy Government Bonds In Australia on Commsec?

 

CommSec allows to trade in Interest Rate Securities the same way as stocks listed on the ASX. A CommSec client can trade all the Interest Rate Securities available on the ASX.

 

The platform allows to:

 

  • Access the current bond price on the website using the ASX code.

  • View charts and other relevant data.

  • Place an order to buy/sell a government bond.

 

CommSec, in partnership with CommBank Investor Sales, enables Sophisticated and Wholesale clients to trade in unlisted or over-the-counter bond investments with an investment of at least $500,000.

 

To start investing in Interest Rate Securities, open a CommSec Share Trading Account. Login to your CommSec Share Trading Account and search for Interest Rate Securities.

 

 

What Is The Safest Bond to Invest In?

 

Bonds are considered the least risky assets; however, it depends on what you invest in.

 

Bonds come in a range from triple-A rated bonds to D. A triple-A bond is a government-backed bond with maximum chances that the entity will repay.

 

On the other hand, D bonds or default bonds carry a higher chance of defaulting during economic downturns. You may lose your principal and interest repayment by investing in them.

 

Higher-quality triple-A bonds will be ideal if you are looking for a safer bond option.

 

 

Do Millionaires Buy Bonds?

 

Yes. Debt securities like bonds are a standard investment option among millionaires as they provide security and a predictable return.

 

 

How Do Bond Investors Lose Money?

 

Bonds usually come with extended maturities, so there is always the risk of an interest rate hike before maturity.

 

It causes the bond value to depreciate. If you continue holding your bond, you may not earn a higher interest rate elsewhere. It makes the bond less attractive to investors.

 

However, not every bond declines with the rising interest rate.

 

  • The yield of Bonds with a "floating coupon rate" remains in line with existing interest rates. Thus, interest rate changes don't impact their capital value and market price.

 

  • Bonds with a fixed coupon rate offer a fixed yield to investors. The value of such bonds may decline to keep pace with interest rate fluctuations. It implies that interest rate hike causes a decrease in their market value and vice versa. So, if you sell a bond prematurely in this scenario, you may suffer a capital loss.

 

 

What Are The Different Interests Paid on Bonds?

 

Type of Bond Interest Rate

Fixed Rate Bond

Is set at the time of issuance of the bond, and stays the same till maturity
Floating Rate Bond Can fluctuate over the term of the bond.

The coupon rate = cash rate + set percentage/margin
Indexed Bond Returns get indexed against the Consumer Price Index which safeguards it against increasing inflation

 

 

Do Bonds Go Down From Inflation?

 

Inflation can be detrimental to a bond's value and market price. It causes the government to increase interest rates on investment options as a controlling measure.

 

This causes the bond's value to decline to keep pace with the rising interest rates. So, if the inflation rate outpaces the fixed income a bond provides, the investor loses purchasing power.

 

However, the impact of interest rate hikes depends on the type of your bond's coupon rate.

 

  • In bonds with a floating coupon rate, their yield stays in line with prevailing interest rates. Thus, the interest rate changes slightly impact its capital worth and market price.

  • However, in fixed coupon rate bonds, changes in interest rates cause the bond's market price to compensate for the rise. So, in this case, the bond's price goes down due to a higher interest rate. Selling the bond at this stage could experience a capital loss.

 

 

Should You Buy Bonds During High Inflation?

 

Inflation could be the perfect time for bond investing. It is the time when a bond's price drops and yield increases. Higher yields and lower bond prices make bonds attractive to new investors.

 

However, buy bonds with floating coupon rates. You will find their yield returning to low as inflation gets controlled and interest rates are reduced. On the other hand, future interest rate changes won't affect the bond yield much if it has a fixed coupon rate.

 

Certain bonds like Treasury Inflation-Protected Securities or Series I Savings Bonds greatly hedge your portfolio against inflation in the long term.

 

 

Should You Buy Bonds When Interest Rates Are Rising?

 

Yes. Interest rate hikes make newer bond issuances more appealing to investors as the bond price drops and yields increase. It presents an ideal opportunity for those waiting to enter the bond market.

 

They can buy bonds/bond funds at discounted prices, lock yields for the long term in case rates fall, and sell them for a profit when the interest rate cycle reverses.

 

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

 

 

Can You Make A Living off of Bonds?

 

You need more than income from bonds to sustain your living. You need a combination of quality stocks and bonds to meet your future living expense. Let's understand it by an example.

 

Suppose you need $3000 per month or $36000 per year. Considering the average bond returns of 3% (after fees), you would need to invest around $1,200,000 to earn interest that could meet your yearly expenses.

 

If you have invested in high-yield bonds with a 4% annual yield, you would also require an initial investment of $900,000, a considerable amount not everyone can afford.

 

As bonds offer significant low-interest rates, you should allocate a part of your portfolio to high-risk, high-reward assets like stocks. It will help reduce bond investment risks, maximize your returns, and achieve your investment goals.

 

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

 

 

At What Age Should You Invest in Bonds?

 

Bond investing is ideal for investors in their 40s who have moderate-risk tolerance and want to preserve their savings as they approach retirement.

 

They can consider investing a small portion of their savings in Treasury bonds to earn a fixed income in their retirement.

 

For young investors, investment in bonds only makes sense due to their low-risk appetite and financial dependency.

 

They should only partially invest in high-growth and high-risk assets and diversify their investment in bonds and moderate-risk assets like index funds/ETFs to earn substantial long-term returns.

 

 

What Is The Safest Investment with The Highest Return?

 

Safer investment options like savings accounts, term deposits, government bonds, and other debt instruments usually offer "low returns" due to the high-level investment protection they offer their customers.

 

High-return investments mainly involve some risks. So, the best high-return investment depends on what type and extent of risk you are comfortable dealing with.

 

However, of the various safer investment options, term deposits could offer the highest returns.

 

 

How Much Does Warren Buffett Invest in Bonds?

 

Warren Buffet doesn't favour investing in bonds due to its bleak future. He doesn't find them a profitable investment option for the short and long term.

 

He points out that the bond yield on the 10-year Treasury bond had dropped 94% between 1981 and year-end 2020.

 

Investors across the world are even earning negative returns on sovereign debt. Thus, fixed-income assets are not an attractive investment option.

 

 

Which is Better, Stocks or Bonds?

 

When looking at the present macro picture, the bond yields have reduced from the 2021 peaks due to the anticipated slowdown in economic growth.

 

If this happens, the government will raise interest rates which can bring down the bond's price. This can be an excellent time to make a small investment in bonds.

 

Growth fears would also impact the stock market, and there could be a decline in the value of cyclical stocks. Thus, you may also get stocks at a cheaper valuation which could make them a good investment option.

 

From a strategic asset allocation viewpoint, it may be an excellent time to consider investing in safer options like gold or silver. So, bonds, stocks, and precious metals could be worth investing in.

 

Always seek the help of a professional financial advisor before making any investment decision. Investing carries risk. The above are just some general options for educational purposes. All these options come with risk. This is not financial advice.

 

 

What Are Some Popular Bonds In Australia?

 

 

SPDR S&P/ASX Australian Bond Fund

 

The State Street Global Advisors Australia Limited manages this bond and provides returns corresponding to the S&P/ASX Australian Fixed Interest Index.

 

The fund comprises the following sectors in its exposure profile:

 

  • Semi-government bonds (27.37%)

  • Commonwealth government bonds (54.14%)

  • Supranational bonds (5.37%)

  • Corporate-finance bonds (4.96%)

  • Government-related bonds (4.78%)

  • Corporate industry bonds (2.23%)

  • Other (0.78%)

  • Corporate utility bonds (0.38%)

 

 

The iShares Core Composite Bond ETF

 

The bond ETF tracks the performance of the Bloomberg AusBond Composite Index, which is the underlying fund index.

 

The ETF mainly holds investment-grade fixed-income securities issued by the government and domiciled corporations in Australia. The average maturity of its underlying investments is between 7 and 10 years, and its total annual return was 2.57%.

 

Australian government bonds:

 

  • AMP Capital Corporate Bond

  • AMP Flex Lifetime S2-AMP Australian Bond

  • Altius Sustainable Bond Fund

  • Artesian Corporate Bond Fund

  • Pendal Government Bond

  • CFS Wholesale Australian Bond

  • Jamieson Coote Bonds Active

  • Legg Mason Western Asset Australian Bond Trust

  • Mercer Australian Sovereign Bond Fund

  • Nikko AM Australian Bond

  • PIMCO Australian Bond (Wholesale)

  • UBS Australian Bond Fund

  • Vanguard Australian Govt Bond Index

 

Click here to find the complete list of Exchange-traded Treasury Bonds on ASX.

 

 

13. Conclusion

 

We hope the above information has enhanced your knowledge of bonds and how to invest in them.

 

Just like any other investment, it is crucial to comprehend the associated risks thoroughly.

 

To make a well-informed decision, conduct extensive research and carefully compare all available options before purchasing. Knowing the risks will enable you to approach bond investments with greater confidence.

 

The advice and information on OzStudies.com is in general nature and should not be seen as a replacement for independent financial advice. We strongly encourage readers to consult with financial experts regarding their own financial decisions and investments.


Please note that the information presented on OzStudies.com is solely for educational purposes. Every individual's financial situation is unique, and the products and services we mention may not suit everyone. We do not provide financial advice, advisory, or brokerage services nor endorse buying or selling specific stocks or securities. It's essential to know that information might have changed since publication and past performance does not guarantee future results.

 

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