We speak to customers about investing on a daily basis and often I find that many people do not invest in bonds for lack of knowledge. Today I thought I should write about bonds with the hope that you will consider investing in Bonds as well. When I invest for people with no or little knowledge of investments and those that prefer very safe investments, I normally start them off with Money Market funds because these are very safe – it is what we call Low risk funds or conservative funds in investment terms. The Sygnia All Bond Index fund is referred to as a low-medium risk fund so it is not as low in risk as the money market fund but it is still low enough to suit investors who don’t want to take on a lot of risk when they invest money and bonds are less volatile than the shares. The fund is recommended for investors who want to invest for a minimum of 3 years. It is suitable for investors seeking an investment vehicle focused equally on capital growth and income generation.
What are bonds?
When Government, state owned enterprises and other big companies want to borrow money for their projects, they issue bonds. This is a way of them borrowing money from the public. In return, they promise to give the investors of their bonds interest. Bonds come with different periods e.g. there are short term bonds: 1 – 3 years, medium term bonds: 3 – 7 years and long term bonds: 7 – 12 year bonds and those that are longer than 12 years. Some of the issuers of bonds in the All Bond Index fund are the RSA Government, Eskom, Transnet, Sanral and First Rand and it invests in South African bonds only. The All Bond Index Fund is passively managed and tracks the performance of its benchmark, the FTSE/ JSE All Bond Composite Index (ALBI) and it pays interest twice a year in September and March. The last 2 payments were:
Payment: 1 Apr 2021 – 4.02 cents per unit
Payment: 1 Oct 2020 – 3.96 cents per unit
What risks is the fund exposed to?
The Fund is exposed to credit risk, where an issuer may not be able to make interest payments or repay the capital as well as liquidity risk i.e. this relates to the ability of the unit trust to trade out of a
security held in the portfolio at or near to its fair value.
I believe that it is always important to look at the historical performance of any fund that you want to invest in. Even though the past is not the predictor of the future, it is always a good indicator of what you can expect from the fund. I have decided to also give you the performance of the Money Market fund alongside this performance so that you get a good sense of how it has done on its own and in contrast to the money market fund. As the performance below indicates, you are definitely rewarded for taking on a little bit of risk by investing in the All Bond Index fund.
So if you are ready to invest in this fund or even in one of the offshore funds, email firstname.lastname@example.org