Tracker Bonds - Great time to buy

M

micks4321

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With all the market negativity around a lot of people are scared of investing.

Me personally I feel it is a great time to get into tracker bonds. Yesterday markets hit all time low since 9/11. If you look at equity markets, anyone who invested at that time would now be minted as the only way thereafter was up.


Has anyone looked at First Actives Autopilot Bond. Its split between 4 asset classes, but the real selling point is, going forward on each respective asset class, if the performance going forward is not equal or great than the average of the past 12 months then your money will not track that index for that month, instead it will revert to Eurobor deposit rates. For me this combats agianst the uncertanty of when equities will recover, one thing is for sure they will, but until such a time at least you obtain deposit rates.


Just my thoughts, anyone else agree?
 
micks4321 said:
.....the only way thereafter was up...

.....the uncertanty of when equities will recover
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Are you sure you are not contradicting yourself there. If there's one thing certain, it's that the only way is NOT up!

Maybe I'm wrong but this sounds supiciously like an ad for First Active. If you have any association with First Active you should state this.
 
Sorry

I prob made my point wrong.

My thoughts are the only way is up over 5 years. I think if you take Feb as your starting point, after 5 years you will have a much higher exit point. With the market diversification feature though, at least your money is not wasted whilst we wait for markets to recover.


Over 5 years do you not think markets will recover, from today?
 
micks4321 said:
Me personally I feel it is a great time to get into tracker bonds.

...

Just my thoughts, anyone else agree?
Click to expand...
Personally I believe that attempting to time the market is a mug's game. As far as I know the evidence is also on my side in this view.
 
I wouldn't consider this to be timing the markets but only if the investment is a long term one.

If prices are lower than they once were, then it's better to buy now than it was then. The investment is better value. People have to invest at some time, better at a lower price than a higher one.

This isn't to say that prices won't drop further, or that a recovery to former heights is guaranteed. One example to keep in mind is that the the NASDAQ has never returned to more than about 60% of its pre-dot bomb levels.
 
Issue one is being bought on 4th Feb, issue 2 is out now.

FTSE 100

NIKKEI 225

S+P 500

EUROSTOCKS 50


Over 5 year periods I think you will see growth from entry point of 4th feb.

The markets may continue to crash and therefore can fall back on deposit safety net but I certainly feel there will be certain months of growth over a 5 year period.

Great product , just my opinion
 
You can't time the stockmarkets in the short term.

However, many people believe that world stockmarkets are great value at the moment and it is very likely that they will be considerably higher after 5 years.
If you agree with this, then you should not be paying the huge price that First Active charge for the guarantee.

If stockmarkets are very high, then it might be worth paying for a guarantee.

Tracker bonds are always poor value.

They are dreadful value at present.

Brendan
 
Can you please explain as to why tracker bonds with full capital protection along with 100% participation are bad value? Obviously you can obtain better results by buying an individual stock but a bond offers full capital protection which I feel is more important. E.G if you invest 40k into this bond your growth is based on 40k not 90% or lower, you get full participation.


Do you understand how bonds are priced and packaged? I do and do not see how you can call bad value????? They dont claim to obtain results which can be achived through medium/high risk funds or even direct shares, but then again anyone who bought individual stocks 9 months probably wishes they opted for a bond now
 
If people suspect spamming or other breaches of the posting guidelines then please use the Report Post facility rather than posting their concerns in the thread. Thanks.

The pros and (arguably many) cons of tracker bonds compared to alternative equity investment routes have been covered in depth many times in existing threads including some in the key posts section. Please review these rather than duplicating discussions.
 
micks4321 said:
Can you please explain as to why tracker bonds with full capital protection along with 100% participation are bad value? Obviously you can obtain better results by buying an individual stock but a bond offers full capital protection which I feel is more important. E.G if you invest 40k into this bond your growth is based on 40k not 90% or lower, you get full participation.


Do you understand how bonds are priced and packaged? I do and do not see how you can call bad value????? They dont claim to obtain results which can be achived through medium/high risk funds or even direct shares, but then again anyone who bought individual stocks 9 months probably wishes they opted for a bond now
Click to expand...

Why do you want to pay for full capital protection if you feel the only way is up for the next five years?

You also haven't stated your connection with FA?
 
It never ceases to amaze me how investors want to buy protection at precisely the wrong time. Brendan is right. These trackers are poor value at the best of times, but right now are particularly bad value.

We (the retail investor), and I include myself in this, are the perfect reverse barometer when it comes to investment timing. You should see a graph of net inflows into mutual funds against the level of the stockmarket if you don't believe me. Most money hits the stockmarket at precisely the wrong time, and cant wait to exit at the bottom.

If you think the stockmarket is offering good value, then a capital guarantee 6 years hence is next to worthless. I'd go further and say, unless you actually think the stockmarket is going to be 20-25% lower that its current level in 6 years time, most trackers are not worth buying. And why? Because you don't get the dividend on a lot of them. So if the dividend is say 3% p.a. (conservatively), over 6 years that is 20% compound. So share prices would have to fall by this amount before a guarantee has any value. Is there anyone out there that thinks the stockmarket (Irish/ European/ US) will be 20% lower in 6 years time?

If anyone thinks yes, then you are better off putting 80% of your money on deposit and buying options with the remainder just in case you are wrong. This way you would avoid paying away the high carges that are buried in most tracker bonds.
 
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