Friday, January 13, 2017

Journey To Retirement Part 10.1 -- CapMallsAsia Bond

As of 12th Jan 2017, CapMallsAsia has finally redeemed all its outstanding bond, CapMallA3.8%b220112 and that signaled the end of my investment in it.  For the 5 years period of investment, capital return is 0%, typical characteristic of bond when redeem at par value and interest return was 20.94%, annualized to be 3.87%.

I was not a strong believer of bond investment despite the fact that it is so-called risk free (presumably referring to Government bond) so in 2012 decided to test out on bond investment.  CapMallsAsia was the one I chosen then given that its 3.8% interest payment at that time was one of the best for retail investor plus CapMallsAsia is part of Capitaland whose major shareholder is none other than Temasek Holding so can be considered "safe" since if anything wrong happens, Temasek Holding would surely come to the rescue.  So after 5 years of plain collecting interest payment every semi-annually, most of the time was "boring" for the investment despite all the volatility in the stock market.

After 5 years, getting my initial capital back without losing a single cent (technically, I did not get back all the capital I initially put in as the $2 administration fee for applying the IPO then still unable to recover back) and earning an annualized 3.87% interest, I still not a fan of bond investment.  The reasons for that are :-

1.  Bond is actually the debt of a company (or Government) and if any individual does not like the idea of having debt then why buying the debt of others ?

2. Bond is considered to be risk-free by most but to me as long as I have to take out cash to put in is not considered risk-free.  Anything can happen like the case of those bonds from O&G companies or Government bonds like those of Greece in which either default or investors have to take a hair-cut loss.

3. In bond it is very difficult and make no sense in compound investment.  Technically, it can be done compounding BUT it will take some time to really save up from the interest payment in order to re-invest a minimum board lot and if the re-invest is at a price above the par value then good luck, a capital loss will be made as redemption is only at par value.

4. Given the case that I could now acquire in share at $0 cost (by some strategic mean), which is TOTALLY RISK-FREE since I need not take out a single cent from my pocket, bond investment will never going to be attractive to me anymore.  That is why I don't even bother to look at the Singapore Savings Bond.

A chapter close on bond investment for me and though I get back the invested capital plus interest payment but I feel that I have not learned any valuable lesson in bond investing.  Time to move on and bond investing is never going to be my option in the future.

4 comments:

  1. Nothing is Free. Even Fixed Deposits.

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    Replies
    1. sit there do nothing, nothing is free. put in effort and do something can get you free.

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  2. Replies
    1. in any investment should be more than just getting interest or dividend.

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