Bonds are less likely to get your heart racing, but you\u2019ll sleep more soundly, says Gaby Rosenberg, co-founder at Aussie fixed income investment app, Blossom.<\/p>\n
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I\u2019ve spent the last few weeks looking at the proliferation of investment platforms and apps.<\/p>\n
Lots of fun.<\/p>\n
So far, however, the only people I\u2019ve called are Ali and Gaby Rosenberg for a brilliantly unsexy idea they\u2019ve appropriately and rather gently called Blossom.<\/p>\n
Instead of making equity bets on your mobile phone or waiting six months for your term deposit to mature, here\u2019s a little Aussie gateway which provides safe and easy access to a professionally managed portfolio of A-rated bonds.<\/p>\n
First up, I\u2019m late to the party, says Gaby.<\/p>\n
Blossom\u2019s been going since COVID, but in this age of crypto-fireworks, memestocks, and Buy Now Pay Laters at last, I thought, here\u2019s a \u2018democratisation of investing\u2019 idea which hasn\u2019t got a whiff of witchcraft or sulfer about it.<\/p>\n
And, mate, in an uncertain economy \u2013 or at least one in which uncertainty has become the norm \u2013 the reliability and stability of this type of investment holds strong appeal.<\/p>\n
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\u201cWe started the Blossom app with the aim of bringing fixed income to the everyday investor,\u201d Gaby told Stockhead<\/em> last week.<\/p>\n \u201cBonds are a kind of cloistered industry \u2013 one which has traditionally high barriers of entry in terms of knowledge, financing and access. The world of fixed income is a privileged one; it\u2019s known for high minimums and lockups and it flies well under the radar.<\/p>\n \u201cAnd we wanted in. And when that was proving to be mind-numbingly painful, we wanted a solution that us, as thwarted investors wanted.\u201d<\/p>\n And then she built this Blossom App where now any little Aussie can get access to quality fixed income, for like, as small a dip as $5.<\/p>\n Eh. But this isn\u2019t about plugging their toy, even if it looks great.\u00a0 This is about plugging bonds, which \u2013 let\u2019s be honest \u2013 don\u2019t.<\/p>\n \u00a0<\/p>\n Fixed income bonds are based on a pretty simple premise: an investor lends money to a borrower for a specific period, in exchange for agreed, regular interest payments.<\/p>\n \u201cWhile it may not deliver the thrills of growth stocks or involve household brands you can namedrop with friends, fixed income has been around since medieval times, and it\u2019s still going strong,\u201d Gaby says.<\/p>\n \u201cUntil recently, it was also as tricky to navigate as the feudal system. <\/p>\n \u201cAssets were difficult to access directly, complicated, and designed for people who didn\u2019t need money in the first place.\u201d<\/p>\n However, nudge, nudge \u2013 times are changing.<\/p>\n \u201cToday\u2019s investor is empowered, informed and looking for new ways to balance their exposure to risk, bringing forth a wave of new fixed income offerings which are convenient, accessible, and pride themselves on low barriers to entry for retail investors.<\/p>\n \u201cIt\u2019s what enraged and then inspired us to go get everyday investors some exposure to Fixed Income Bonds in a way that\u2019s beneficial, but also flexible and accessible.\u201d<\/p>\n The two don\u2019t often go hand in hand, Gaby adds.<\/p>\n \u201cThe bond market has also undergone a transformation, embracing electronic trading platforms, which allow direct investment and increased transparency. It enabled the expansion of bond ETFs (Exchange Traded Funds) \u2013 giving investors access to fixed income markets, whilst enjoying the flexibility of trading on stock exchanges.<\/p>\n \u201cThe sum total is a win for retail investors, enabling more efficient, cost-effective investing.\u201d<\/p>\n \u00a0<\/p>\n Earlier this year, Sally Auld, chief investment officer at JBWere said fixed income would be the rising star of 2024 and would remain a key component of portfolios given the current attractive valuations.<\/p>\n \u201cRising interest rates and geopolitical tensions make fixed income an attractive proposition\u2026 We prefer long duration positions in government bonds and exposures in high quality Australian dollar credit to anchor the fixed income component of portfolios.\u201d<\/p>\n Gaby says that in the current market, investment strategies that focus on protecting wealth have become the main event, rather than just a back-up plan.<\/p>\n \u201cIn a bid to avoid the swings of the stock market and the unpredictability of inflation, investors seek out returns they can depend on,\u201d Gaby told Stockhead.<\/em><\/p>\n The whole concept of bonds is that they offer precisely that \u2013 a focus on preserving capital, shielding investors from the volatility and vitriol, the uncertainty and the tumultuous ups and downs of equities.<\/p>\n \u201cBonds bring investors closer to one thing that\u2019s priceless: peace of mind,\u201d she says.<\/p>\n And it\u2019s a good line.<\/p>\n \u201cBonds work by lending money to governments or corporations in exchange for regular interest payments, and the return of the initial investment at a later date. They\u2019re often diversified, spreading risk across a variety of assets; while one asset may experience a downturn, most others might rise, delivering more stable returns overall.<\/p>\n \u201cThis diversification not only brings a more robust, sustainable element to a portfolio \u2013 it also smooths out some of the bumps of market fluctuations.<\/p>\n \u201cAll that being said, perhaps the most appealing feature of fixed income bonds is simply the most obvious one: access to consistent, predictable returns.<\/p>\n \u201cThe global economy over the last five years has taken some hits, along with anyone who has bumped up against it\u2026 an opportunity to make money with added reliability and restful nights is something we\u2019d all appreciate right now.\u201d<\/p>\n Word. But there\u2019s always a but. What about fixed income risks?<\/p>\n \u201cA well-diversified, balanced portfolio usually includes some allocation to fixed income, but like any investment, it also carries its own set of risks.<\/p>\n When interest rates rise, the value of existing bonds tends to fall, and vice versa.<\/p>\n Gaby says this risk is mostly relevant for long-term bonds.<\/p>\n \u201cBut if you own a bond with a fixed interest rate and market interest rates rise, the value of your bond may decrease because investors can buy newly issued bonds at higher rates.<\/p>\n \u201cLikewise, if inflation rises faster than the yield on your bond investment \u2013 the purchasing power of your returns may decrease over time.\u201d<\/p>\n The other thing which is rare as hen\u2019s teeth or poor governance \u2013 there\u2019s also the chance that the issuer defaults.<\/p>\n \u201cHowever bonds issued by governments and financially stable institutions typically come with low risk of this\u2026 Generally, fixed income bonds offer lower volatility and more stability compared to the alternatives.\u201d<\/p>\n \u00a0<\/p>\n While Australia\u2019s bond market may not be as large or liquid as other major economies (e.g. the US or Japan), it has grown significantly in recent years, and yields have been relatively high in comparison to the big players, Gaby says.<\/p>\n \u201cThis may be because the Australian bond market relies heavily on government bonds issued by the Commonwealth Government, known as Commonwealth Government Securities (CGS), as well as bonds issued by state governments and corporate bonds.<\/p>\n \u201cWe also run a tight ship when it comes to regulation, with bodies like Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) focused on market integrity, transparency, and investor protection.<\/p>\n Australia\u2019s sovereign credit rating is AAA, one of just nine countries worldwide to be rated so highly by all three major credit rating agencies \u2013 although credit where credit\u2019s due, these are the same ratings agencies that were in The Big Short, with My Ryan.<\/p>\n Our strong credit rating means Australia has access to funds at lower rates and an ability to offer higher quality and lower risk, compared to bonds from other countries, Gaby says.<\/p>\n \u201cThis makes it attractive to both domestic and international investors on the hunt for more stable and profitable investments.\u201d<\/p>\n \u201cOkay. Bonds are less likely to get your heart racing, but you\u2019ll sleep more soundly knowing they\u2019re a confidently safe store of value \u2013 and a good night\u2019s sleep is a commodity everyone is looking for.\u201d<\/p>\n Nice.<\/p>\n <\/span><\/p>\n The post For the soundest sleep, Rosenberg reckons it\u2019s gotta be bonds<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"The Feudal Option<\/h2>\n
Gimme Shelter: Fixed Income Bonds<\/h2>\n
Fixed income bonds in Australia<\/h2>\n