Last year I blogged about wanting to invest in bonds as one of my goals because I’ve heard smart people invest in stocks, but smarter people invest in bonds Then earlier this month I wrote about taking out a loan and have dedicated some money to buy bonds with.
Well I have finally taken the plunge into bonds. Yesterday morning I purchased $5,000 face value of the Sherritt International Corporation 8% bonds, maturing on Nov 15, 2018, for the price of $104.475. I will explain the jargon in a moment, but essentially what this means is I have made an investment of roughly $5,200. And by the end of 2018 that investment will turn into $6,800. That represents a 6.8% annual return It’s not the best investment ever, but it sure beats the low returns on 5-year CDs and GICs.
Bonds are generally safer investments than stocks because if a business goes bankrupt bond holders have priority over shareholders muahaha. I’m not 100% sure on this so maybe Chuck the bond trader can weigh in, but I assume this means my 6.8% bond return is pretty much guaranteed as long as Sherritt stays in business until my bonds mature. Considering how the company’s stock is part of the S&P/TSX Composite index and it hasn’t missed a quarterly dividend payment in almost a decade, I think my 6.8% return is pretty safe
I will discuss three topics in today’s post: Why I’ve decided to buy these bonds. How to buy bonds. And what are the risks and expected returns of my new bonds.