What happens when you stay invested for the long term ignore short-term market movements
Investing Safely, Investment News

What Happens When You Stay Invested For The Long-term & Ignore Short-term Market Movements

Hi everyone, I'm back for this week's video and I hope you all of you are staying at home and practicing social distancing. It's a really scary time with what's happening in the country, in the markets and in the economy as a whole. And so I thought of shooting this video from home instead of from the office for these very reasons.

The main purpose of shooting this video is - I want to take away the fear of investing, the fear that most investors get when we watch the media and what's playing in the news channels all the time of all doom and gloom and how markets are collapsing and all the next recession is happening and how we are all basically doomed.

All we have to do is take a deep breath, stay calm, and know that the good principles of investing work as long as we let them
work for us.  

The topic of this video is 'What happens when you stay invested for the long term and ignore short-term market moments'.

  1. The first thing that happens is your money gets time to work for you,
  2. The second is the risk of loss reduces, and
  3. The third, you have less financial stress

Now I'm going to talk about these three points by showing you some actual numbers with a file that I have created and that file shows you the performance of markets over the last 20 years.

The first example I'm looking at for this is, the performance of stocks over the last twenty years and this file is having 10 stocks - names that you know and you have grown up with. Most of these names would be very familiar to you.

Companies such as:

  1. Apple
  2. Caterpillar Inc.
  3. Vertex pharmaceuticals.
  4. Boeing
  5. Pepsi
  6. Walt Disney,
  7. Marriott International
  8. McDonald's
  9. Tractor Supply Company, and
  10. Northrop Grumman.

These are some of the top companies from each of these industries that we have chosen, and as you can see this is a very diverse portfolio with one top company from each industry. 

Now I want you to imagine this scenario where you have invested $10,000 in each of these stocks and just let the money sleep for various periods of time. Then in this file what we are going to see is how the markets perform given various amounts of time for the stock to grow. 

So let's assume that you invested one year ago, $10,000 in ten stocks that equals $100,00. Now as you have seen what's happening in the last one year, the turmoil in the markets, everything that's played out. In this example, if you had invested one year ago, you would have lost 11% of your portfolio value over the last one year. That's scary and many people think that's the reason why I'm not in the stock market. 

But let's imagine what would happen if you had invested three years ago. Now in the same example if you invested three years ago you and decided to that you just leave the money in there and how would your money have grown. So if you had invested three years ago, your money would have gone from $100,000 to $123,000, and you would have netted 8% per annum as a growth. 

Now considering inflation is 3% per annum, 8% per annum is a pretty decent number.

Now take that to the five year mark, and imagine you invested in 2015,  the $100,000 has grown to $134,000 which is 7% per annum. It's more or less similar to the three year performance. By this time you're saying - Amit what's so special about this video you're making because 8 or 7% is nothing to write home about. I agree with you - it's not anything to write home about, but still it's a decent growth that you get, if you just leave your portfolio alone, and let the money work for you without fiddling too much.  

Now let's look at the 10-year number. In ten years, that is if you had invested in 2010 instead of 2015, the same $100,000 would have grown to $160,734, which means you have got an annualized growth of 26% per annum. Now this is decent by anyone's standards in a portfolio which has not been fiddled with, there has been no buying or selling, and there has been no timing the market at all. We just followed Warren Buffett's principle of staying invested for a long term. 

There's still one more column, and I'm sure its going to blow your socks off. The last column is the 20-year growth column, and as you can see if you had invested $100,000 not in 2010, but in the year 2000 itself that $100,000 which was invested 20 years ago and forgotten about completely, would have grown to $1.6 million, with an annualized growth of 72% per annum. Now that's something to write home about.  

What I want you to take away from this particular file is - 'Markets and money need only one thing to grow and that is time.'

As long as you allow enough time for your money to grow there is no way your money would be lost, or you would get less than what you invested, unless something like a big global war happened.

As you can see a period of 7 to 8 years, or even a 5-year period is a decent period where the chances of you getting less than what you invested reduce, and the chances of you getting way more than what you invested increase dramatically.

In summary, the three things that happen when you leave your money invested for the long term and when you ignore short term market moments is -

  1. Your money gets time to work for you,
  2. The risk of loss reduces, and
  3. The third and the most important thing that happens is you have less financial stress.

I'm sure you got much more better things to do like spending time with your family, following the hobby that you like, or even doing the work that you like, without having to worry about how markets perform, and whether your future is protected or not. Those things are not relevant in the short-term, they are relevant in the long-term. 

I wish you good luck with your financial goals and as usual, if you have some questions feel free to leave them in the comments section below.

Thank you stay at home, and

God bless

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3 Reasons Why The Markets Are Volatile Today and What You Can Do About It
Investing Safely, Investment News

3 Reasons Why The Markets Are Volatile Today, and What You Can Do About It

For the last 7 days I have been getting calls and emails from clients who are concerned about their investment portfolios and what they can do to mitigate the effects of the current market volatility.

Reason 1 - COVID19 Effect on Stock Markets

There are many companies globally that depend on Chinese manufacturers and suppliers for their business. One of the examples is Apple Inc. The main product that Apple manufactures is the iPhone. The turnover of iPhone alone is more than the annual turnovers of many companies. This year the delivers of the latest iPhone models are going to be delayed because of the stoppage of manufacturing in China.

The Chinese government has rightly been trying to contain the spread of the virus by stopping manufacturing and activities that require many people to be in the same area together. So this has obviously affected the deliveries of the iPhone, and when deliveries are affected, turnover is affected. When turnover is affected, profitability of the company for that year reduces. When profitability reduces, the stock price drops.

When investors globally see different manufacturers and companies get affected by COVID19, obviously the stock values of those companies and markets as a general drop. Now how is this going to play out. Hopefully with the rising temperatures, COVID19 might die down in the next 3-6 months, because of the all the measures that different companies are putting in place to make sure that it does not spread and also because of the rising temperatures in summer. So COVID19 is hopefully not going to be an issue after the next 5-6 months.

Reason 2 - Upcoming US Elections

The second reason is the US elections. Now as you know Donald Trump is trying his best to get elected for the second term and all the measures that he has been putting in place such as the tariffs and the sanctions on different companies is a bid to get reelected.

Again, that’s a temporary situation, and one or the other if Donald Trump gets elected or not, or if some other president replaces him, the market fluctuations that are happening will subside and the portfolios will stabilize again.

Reason 3 - Oil Price War between Saudi Arabia and Russia

The third reason which should take longer to subside is the oil price war between Saudi Arabia and Russia. The Saudis are content to keep the oil price at 25-30 dollars per barrel, and so is Russia as well.

Having said that, these prices aren’t sustainable for more than 5-6 months at the most, because this will reduce the turnovers and foreign exchange buffers that these countries have been building through the revenues from oil production and this definitely cannot last long. Russia will eventually reach an agreement with Saudi and the OPEC on oil prices.

In summary, the three reasons that are disrupting the markets today are temporary.

What can investors do about this situation?

Firstly, try and remember that unless you need the money from your investment portfolio in the next  5-6 months, you don’t need to be overly worried about what’s happening.

Remember our financial goals and milestones are long-term, whether we are planning for our own retirement or we are planning for our children’s college education fees, or buying or home, what have you. Unless we need the money in the next 6 months, we should not be worried.

Now I have one client whose savings plan is maturing in May and I know for a fact that he does not need the money even though his savings plan is maturing in May, and what he can do about it is leave the money invested, wait for the markets to recover and then take the money and use it for his son’s education.

If you have specific types of investments, this is what you can do about it.

If you have a Savings Plan:

The savings plan is built in such a way that you contribute a monthly, quarterly, or a yearly amount regularly, and keep buying units. That’s how dollar cost averaging works. If you have a savings plan, my suggestion is to prepay the contributions for the next 3, 6 or even 12 months if you can afford it.

What will happen in this case is, all the money that you are pre-paying in advance will buy more units at way lower prices. You will get the biggest bang for the pre-payments that you make today and over time when the markets recover, your savings plan will perform well.

If you have a Lump sum Investment:

The recommendation for a lump sum investment is simple. If you have Stocks, ETFs or Mutual Funds that are positive in value, my suggestions is to book the profits and get into a physical gold fund. There are many ways to buy physical gold online. My favourite physical gold ETF is the iShares Physical Gold ETF or the iShares Physical Gold Trust ETF which is slightly cheaper.

Gold performs inversely as compared to the broader market. When markets are up, gold goes down, and when markets are down, gold does well. If you have gold in your portfolio great, if you don’t this is the time to switch the funds that are up into physical gold. If your stocks or funds are down, my suggestions is to not panic and hold on till the time the funds recover to at least the value at which you bought them, and then book the profits into physical gold.

Either ways, if you have a savings plan or a lump sum investment you don’t need to worry about this temporary fluctuation in the market, keeping in mind that your goals or long-term.

Please feel free to leave your comments, questions or suggestion in the comments section below.

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Change recurring billing on your savings plan
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22pc in 30 months
Investment Returns, Fixed Income Investments, Invest Smart, Structured Products

Clients To Receive 22% Cash Returns in 30 Months

22% Cash Returns in 30 Months

We are pleased to announce that another Fixed Income Note from Natixis S.A., has matured last week after just 30 months in operation.

In addition to receiving their full capital back, our clients invested in this note are due to receive cash returns of 22% in 30 months.

Our clients were invested in the following stock indices 'Wisdom Tree Fund' (India), 'iShares MSCI Australia', 'iShares MSCI Canada', and 'EuroStoxx 50' (Europe), through this fixed income note.

This Natixis S.A. Note is just one of a unique range of fixed income products offered exclusively by us.

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12pc in 18 months
Investment Returns, Fixed Income Investments, Invest Smart, Structured Products

Clients To Receive 12% Cash Returns in 18 Months

12% Cash Returns in 18 Months

We are pleased to announce that another Fixed Income Note from Natixis S.A., has matured last week after just 18 months in operation.

In addition to receiving their full capital back, our clients invested in this note are due to receive cash returns of 12% in 18 months.

Our clients were invested in the following stock indices 'ASX 200' (Australia), 'Dax 30' (Germany), 'Nikkei 225' (Japan), 'SMI' (Swiss Market Index) and 'S&P500' (U.S.A.), through this fixed income note.

This Natixis S.A. Note is just one of a unique range of fixed income products offered exclusively by us.

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10pc in 12 months
Investment Returns, Fixed Income Investments, Invest Smart, Structured Products

Clients To Receive 10% Cash Returns in 12 Months

10% Cash Returns in 12 Months

We are pleased to announce that another Fixed Income Note from BNP Paribas, has matured last week after just 12 months in operation.

In addition to receiving their full capital back, our clients invested in this note are due to receive cash returns of 10% in 12 months.

Our clients were invested in the following stock indices 'HSCEI' (Hong Kong), 'Nasdaq 100' (Nasdaq Composite Index - U.S.A.), 'Nikkei 225' (Japan) and 'OMX 30' (Stockholm, Sweden), through this fixed income note.

This BNP Paribas Note is just one of a unique range of fixed income products offered exclusively by us.

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The 3-Step Process I followed to secure my children's futures
Saving For College, Secure Your Child's Future

The 3-Step Process I Followed To Secure My Children’s Future

It all started with me wanting to give ‘The Ultimate Gift’ to my kids. The same gift my father gave me.

But I didn’t know what careers my kids would choose when they grew up, but I knew that higher education would cost a bomb.

Soham is 12 years old today, and Anjali is 7. 

When Anjali was 3, I started saving for her college education fees. This is how I went about doing it.

Step 1 - Set the right savings goal

I researched the average cost of 4 years of graduate studies and cost of living, in different countries as appropriate.

The average costs for 4 years of college (and cost of living) in these countries were as below:

  1. U.A.E. - USD 80,000
  2. U.K. - USD 160,000
  3. U.S.A - USD 265,000

Since, I had to choose one savings goal, I decided to err on the side of caution, and aim for the cost of studying in the United Kingdom (U.K.) i.e., USD 160,000 for 4 years of graduate studies and cost of living and traveling.

Then I had to allow for the effect of inflation. Like everything else the cost of education goes up each year. In fact, the cost of education goes up by an average of 5% every year.

In Anjali’s case, there were 15 years to go before she turned 18. That meant the costs would double at the rate of 5% per annum, i.e., I would need to pay USD 320,000 for 4 years of college education in the U.K.

Step 2 - Figure Out What Needs To Be Done

After identifying the savings target, the next step was to decide whether I wanted to save on a monthly or one-off basis (lump sum). 

Most parents I know preferred to put aside a small amount each month, which is what I preferred as well.

There were two ways to do this:

  1. Back calculate from the USD 320,000 and see how much I needed to save at an assumed growth rate, or
  2. Start with an amount that I was comfortable to begin with for e.g. USD 1,000 or 1,500 per month.

I have developed a simple calculator for this which you can access here.

Step 3 - Figure Out Which Savings Plan Suits Your Goal

The next step was to select the right savings and investment vehicle towards this goal, and this needs the help of a qualified and independent financial advisor. 

I did this myself, as I am a financial advisor and I suggest you save some time and effort and get qualified financial advice before you begin.

A qualified financial advisor will help you select the right savings/investment plan for your goal, and

also the term you need to save for, going forward.

These are just the basics. Then he will select where your money will be invested specifically each month or for the lump sum, and look after your savings plan for you, till you need the money.

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My Father’s Ultimate Gift To Me
Saving For College, Secure Your Child's Future

My Father’s Ultimate Gift To Me

Saving For College Education

My father was a self-made man. He grew up in a very poor family. His condition was so dire that he lived on hand-me downs from his friends and class mates, as he couldn’t pay for his books and school fees himself.

He would borrow books from his classmates after they were done studying, and then study through the night to catchup on that week’s topic in school. He knew he had to score the highest marks in school to qualify for the scholarships. These scholarships then paid the fees which his dad couldn’t afford.

This was his story growing up in school, and even through college. He became a metallurgical engineer and completed his PHD in statistical analysis on his own. He paid for his own education through scholarships throughout his career.

He did not study in the best university growing up, and there were no campus placements or interviews in his time. He had to find a job and start from the bottom of the ladder and work his way up. In the end, the highest position he ever held was ‘General Manager’ in one of the TATA group of companies. 

He found it hard to succeed because he hadn't studied in one of the best universities.

When he died in 2007, I cried the most in my life, as I had lost my role model.

My dad and brothers

My dad and brothers

What I remember growing up was his constant push to make me better than him. He always stressed a lot on the importance of a good education, and wanted me to have the things and lifestyle that he didn’t get. 

In short he wanted me (his son) to be more successful than he ever was. He made sure that I got the best education (he could afford) by cutting down on his own lifestyle and spending.

I still remember him doing his consultancy work after office hours (every day), to earn extra money to send me to university.

In the end, the money he made just enough to pay for my MBA in the Australian University here. 

By sending me to a good university, my father had given me the ultimate gift... the gift of a good education.

I believe where I am today, and the level of success I have achieved so far, is mainly because of him.

My son Soham was born 6 months after my father died. Every time I look at Soham, I get reminded of my dad somehow. I feel his spirit has lived on through him.

My daughter Anjali was born 5 years later, and my goal for both of them, is to pass on the ultimate gift to them.

I want to give them a higher platform and opportunities than I ever had, and instill in them the same drive to succeed.

I want them to be more successful than me. 
Soham and Anjali

Soham and Anjali

This is one of the reasons why I talk so passionately about ‘Saving For College’ to others. Sure, I don’t know what career they will choose, or what university they may want to study in, but there is one thing I know for sure. 

When they reach the age of 18, and say ‘Dad I want to choose this university’, I should be able to afford it. Because, the only other thing I could say is ‘Son, choose another profession as I cannot pay for this one’. That’s not what I want. 

Imagine a life where my son goes through life stuck in a dead-end job which he doesn’t like, in a career that wasn’t his first choice. 

That would be awful isn’t it? I wouldn’t want my kids to work in a job they don’t love. 

After all, it was Steve jobs who said, ‘The only way to do great work, is to love what you do’.

As a financial advisor, I followed this ‘3-Step Process’ to secure their future.

find out how you can secure your child's future

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Old Mutual International - ERB Wins Best Portfolio Bond Award 2019
Investment News

Old Mutual International ERB Wins Best Portfolio Bond Award 2019

Old Mutual International ERB Wins Best Portfolio Bond Award 2019

International Adviser hosted its annual Fund Links Forum event in London’s JW Marriott Grosvenor House Hotel on 17 October and recognised excellence across the industry with two sets of awards.

Old Mutual International won the award for the best international portfolio bond with their product the 'Executive Redemption Bond (ERB)'.

The Old Mutual International Executive Redemption Bond is one of the best open architecture investment platforms out there.

The link to the original post on international-adviser.com is here.

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Investors Trust Assurance S&P500 Wins Best Savings Plan Award 2019
Investing Safely, Investment News

Investors Trust Assurance S&P500 Wins Best Savings Plan Award 2019

Investors Trust Assurance S&P500 Wins Best Savings Plan Award 2019

Who triumphed in the Global Financial Services Awards and Best Practice Adviser Awards UK?

International Adviser hosted its annual Fund Links Forum event in London’s JW Marriott Grosvenor House Hotel on 17 October and recognised excellence across the industry with two sets of awards.

Investors Trust Assurance won the award for the best savings plan with their product the 'S&P500 Index'.

Investors Trust Wins Best Savings Plan Award For 2019

I am very happy about this achievement by Investors Trust because of the following reasons:

  1. I use the S&P500 index savings plan myself to save for my daughter's college education.
  2. A lot of my clients have put their trust in this savings plan, and
  3. Because Investors Trust puts their client's interests first, by being very responsive to their feedback and suggestions, and innovating continuously over time.

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Lombard 82 Series 7 Review
Fixed Income Investments, Lump-sum Investment Reviews, Vetted Investments

Lombard 82 (EMTN) 8% p.a. Securitisation Fund Review

Lombard 82 Securitisation Fund - Series 7

A modern investment approach designed to provide consistent returns

Key Facts

  • Suitability - Professional Investors Only 
  • Interest - 8% per annum (2% per quarter)
  • Subscription period - The subscription period is ongoing. Each EMTN can be purchased at any time from 1 January 2019 until 31 December 2023.
  • Investment currencies - GBP / EUR / USD
  • Par Value - GBP 1 / EUR 1 / USD 1
  • Minimum subscription - USD 250,000
  • Platform - Cornhill FlexMax Investment Account (MIFIID 2 Compliant)
  • Subscription frequency - Monthly
  • Redemption Period - Quarterly
  • Subscription fees - Upon agreement
  • Redemption Fees
    • 5% within the first year
    • 4% within the second year
    • 3% within the third year
    • 2% within the fourth year
    • 1% within the fifth year
    • 0% within the sixth year
  • Management Company - Xantis S.A.
  • Administrator - Trident Trust Company (Luxembourg) S.A.
  • Auditor - International Audit Services S.à.r.l., Luxembourg 

INTRODUCTION

  • Lombard 82 Securitisation Fund, formerly known as Zero Load Securitisation Fund or ‘ZLSF’, or ‘Zero Load’ is a Fund established under the Securitisation Fund Law of 2004 (Luxembourg).
  • Its purpose is to acquire the future income of Luxembourg based financial investment products at a discounted present value of up to 9% per annum - resulting in a discounted sale price of around 50% of the face value.
  • Over time actual income from the purchased Luxembourg investment products flow into Lombard 82.
  • In order to finance its activities Lombard 82 issues bonds in the form of Euro Medium Term Notes (EMTNs)

THE INVESTMENT OPPORTUNITY

An investment into Lombard 82 Series 7 (EMTNs) offers:

  • Quarterly interest (which can be reinvested to earn more interest or paid directly into the investor’s account).
  • Exposure to the potential of growth in the Luxembourg investment fund industry.
  • Investment access in GBP / EUR / USD.
  • Consistently high returns of at least 2% per quarter.
  • Return of 100% of original capital plus any unpaid interest up to the date of redemption.

INTEREST PAYMENTS

  • Payment frequency - Quarterly
  • Investment period - Minimum investment period – 5 years; redemption possible at any time before the expiring of five years but subject to the payment of a redemption fee (see Key Facts)
  • Investment return - Minimum return = 2% per quarter (maximum 8% per annum)

About Euro Medium Term Notes (EMTNs):

For further understanding of how Euro Medium Term Notes (EMTNs) work, please read - Euro Medium Term Notes, (EMTNs) A Smarter Way To Invest For 3-5 Years.

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Financial instruments are not easy to understand at the best of times. Please feel free to ask a question by clicking the button below, and I will be happy to answer all your questions.

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Lombard 82 Series 9 Review
Fixed Income Investments, Lump-sum Investment Reviews, Vetted Investments

Lombard 82 (EMTN) 6% p.a. Securitisation Fund Review

Lombard 82 Securitisation Fund - Series 9

A modern investment approach designed to provide consistent returns

Key Facts

  • Suitability - Professional Investors Only 
  • Interest - 6% per annum (1.5% per quarter)
  • Subscription period - The subscription period is ongoing. Each EMTN can be purchased at any time from 1 January 2019 until 31 December 2033.
  • Investment currencies - GBP / EUR / USD
  • Par Value - GBP 1 / EUR 1 / USD 1
  • Minimum subscription - USD 50,000
  • Platform - Cornhill FlexMax Investment Account (MIFIID 2 Compliant)
  • Subscription frequency - Monthly
  • Redemption Period - Quarterly
  • Subscription fees - Upon agreement
  • Redemption Fees
    • 5% within the first year
    • 4% within the second year
    • 3% within the third year
    • 2% within the fourth year
    • 1% within the fifth year
    • 0% within the sixth year
  • Management Company - Xantis S.A.
  • Administrator - Trident Trust Company (Luxembourg) S.A.
  • Auditor - International Audit Services S.à.r.l., Luxembourg 

INTRODUCTION

  • Lombard 82 Securitisation Fund, formerly known as Zero Load Securitisation Fund or ‘ZLSF’, or ‘Zero Load’ is a Fund established under the Securitisation Fund Law of 2004 (Luxembourg).
  • Its purpose is to acquire the future income of Luxembourg based financial investment products at a discounted present value of up to 9% per annum - resulting in a discounted sale price of around 50% of the face value.
  • Over time actual income from the purchased Luxembourg investment products flow into Lombard 82.
  • In order to finance its activities Lombard 82 issues bonds in the form of Euro Medium Term Notes (EMTNs)

THE INVESTMENT OPPORTUNITY

An investment into Lombard 82 Series 9 (EMTNs) offers:

  • Quarterly interest (which can be reinvested to earn more interest or paid directly into the investor’s account).
  • Exposure to the potential of growth in the Luxembourg investment fund industry.
  • Investment access in GBP / EUR / USD.
  • Consistently high returns of at least 1.5% per quarter.
  • Return of 100% of original capital plus any unpaid interest up to the date of redemption.

INTEREST PAYMENTS

  • Payment frequency - Quarterly
  • Investment period - Minimum investment period – 5 years; redemption possible at any time before the expiring of five years but subject to the payment of a redemption fee (see Key Facts)
  • Investment return - Minimum return = 1.5% per quarter (maximum 6% per annum)

About Euro Medium Term Notes (EMTNs):

For further understanding of how Euro Medium Term Notes (EMTNs) work, please read - Euro Medium Term Notes, (EMTNs) A Smarter Way To Invest For 3-5 Years.

Ask A Question

Financial instruments are not easy to understand at the best of times. Please feel free to ask a question by clicking the button below, and I will be happy to answer all your questions.

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Euro Medium Term Notes EMTNs A Smart Way To Invest
Investing Safely, Vetted Investments

Euro Medium Term Notes, (EMTNs) A Smarter Way To Invest For 3-5 Years

When you are searching for the right investment for your investment goal, the most important consideration apart from 'Risk to your capital' is 'The Investment Term' i.e. the time frame after which you need your money back.

The Rule of Thumb For Different Investment Time-Frames

  1. Investment Time Frame - Upto 2 Years: If your investment time frame is less than 3 years, the primary consideration is 'Access to the money' - the best option is to keep your money in the bank in Fixed Deposits or money-market funds. 
  2. Investment Time Frame - more than 5 years: If your investment time frame is more than 5 years, you can use the traditional investments vehicles of Stocks, ETFs, Mutual Funds, Real Estate or Commodities, as 'Investment Returns' are the primary concern as opposed to 'Access to the money'.
  3. Investment Time Frame - between 3 to 5 years: This is a tough nut to crack because the challenge is to find an Fixed Income Investment that is 'Safe', but also one that gives 'decent returns' over and above inflation, i.e. more than 3% p.a..

Why Bonds May Not Provide the Solution

  1. Government Bonds: Decent investment grade government bonds offer upto 3.5% p.a. Government Bonds with lower credit rating offer higher returns, but the risk to the capital is higher as well.
  2. Corporate Bonds: This means we have to look at corporate bonds as an option to get returns over and above inflation (3.5% p.a.). Investment grade corporate bonds offer around 4.5% p.a., but need a minimum investment of USD 200,000, which is out of the scope of many investors.
  3. Rising Interest Rates & Falling Yields: Rising interest rates in the current environment, reduce the bond yields, thereby making this option even less attractive. And junk bonds are very high risk, thus defeating the purpose.

Euro Medium Term Notes (EMTNs) - A Smarter Choice

  1. A Euro Medium-Term Note is a medium-term, flexible debt instrument that is traded and issued outside of the United States and Canada.
  2. The principle characteristic of an EMTN programme is its flexibility. This flexibility benefits both the issuer and the investor. Once a programme is established, companies can use an EMTN programme to raise funds when they need it.
  3. Investors also benefit from the flexibility of EMTNs. The flexibility of EMTN programmes means that issuers can sell instruments that meet investors’ requirements exactly, for example by issuing debt with a maturity that fits investors’ needs.
  4. These instruments require fixed payments and are directly issued to the market with maturities that are up to five years. EMTNs allow an issuer to enter foreign markets more easily to obtain capital. 
  5. Firms also offer EMTNs continuously, whereas a bond issue, for example, occurs all at once.
  6. It costs less for the issuer of an EMTN than to issue a corporate bond, and borrow money from the market. This also allows the issuer to offer higher annual coupons to the investors.
  7. You can invest in an ETMN for as low as USD 50,000 as opposed to USD 200,000 for a comparable corporate bond. 
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