Stock Purchase – Royal London Sterling Extra Yield Bond

On Friday 5th September 2014, I purchased 915.66 shares, at 103.75p per share, in the ‘Royal London Sterling Extra Yield Income Bond’. The total cost with charges was £950The acquisition is an extension of a holding I already own. I’ve now increased my position from £200 to £1,150. 

The ‘Underlying yield’ is 6.37% at the time of writing this post. The percentage is prior to charges/expenses, and the yield is not guaranteed. As I mentioned in my recent post on My Dividend Yield, I calculated the total return for my £200 investment, and reviewed what I’m likely to receive for 2015. I estimated a yield of 5.86% (after fees). The income is paid out on a quarterly basis. 

The Fund has two charges; The ‘Fund Managers annual charge’ – 0.32% and the Fund Managers ‘other expenses’ – 0.11%. The combined total is 0.43% and this percentage is taken out of the income received. 


My Broker shares their view on the fund:

“We consider this to be at the higher risk end of bond portfolios. As such this fund could be considered by investors looking for a higher level of income, but who are willing to tolerate potentially higher volatility in search of superior long-term returns.”


They also share their opinion on the sector itself. I thought this was worth sharing: 

“Fixed-interest investments have yielded strong returns for investors over the past few years. In a low interest rate environment the yields on offer have proved attractive. Funds in this sector tend to invest mainly in ‘high yield’ or ‘non-investment grade’ bonds. These are issued by companies perceived to be less credit worthy and as such offer investors higher yields to compensate for the extra risk. High yield bonds tend to perform better when economic growth is stronger. When the economy is buoyant companies should be capable of servicing their debts, resulting in fewer defaults. As they are more sensitive to economic growth high yield bonds often perform more like shares than investment grade corporate bonds. Funds in this sector could appeal to investors looking for a high level of income from their investment, but who are willing to take on higher risk in return.”


The purchase has now increased the size of my portfolio to £15,479.80 on 5th September 2014. My Goal at the start of 2014 was to have a portfolio worth £12,000 by the end of the year. After achieving that in July, I made a second Goal of £17,500. I’m now £2,020.20 off that target with three months to go. 
My wage for October will be the lowest of the year, and I’ll have very little disposable income to use for investing. November and December wages will determine whether or not I achieve that goal. It should be a close and exciting finish……


Have you recently tried a different investment option? What are your thoughts on Bonds and Funds? 

0 Comments

  • weenie

    Reply Reply 12th September 2014

    Hi Huw, interesting purchase – I'd never heard of the company before or this kind of bond. I'm now invested in shares, funds, index trackers, investment trust, peer to peer loans so probably will just stick to these for now as there's still much I can do for my portfolio. Great gains though and good spot by you, to take advantage!

    I'm about £2k off my portfolio target too and as I'm going away for Christmas, it's touch and go whether I hit it or not!

    Anyway, hope you have a nice weekend! 🙂

  • Cerridwen

    Reply Reply 13th September 2014

    Hi Huw, first of all a big "well done" on your progress towards target.

    Bond funds are something that I do have investments in but mainly as part of my "mixed assets" managed funds and I also put a small amount into a Standard Life Corporate Bond fund as part of my monthly AVC payment. To be honest I really feel I should read up on this type of investment more (again) as I am very aware that I am not quite clear about the different type of bonds and associated risks/volatility. Thanks for giving me a prod in the right direction.

  • Huw Davies

    Reply Reply 14th September 2014

    Hi Weenie,

    I had never heard of the company or a fund that deals primarily in high income bonds either. I stumbled across it when I was searching for funds with high yields and this one leaped out. I remember at the time thinking it wasn't likely to payout at the rate it had stated, but the income has been very high so far.

    I looked through your investments this week, and I can see how well diversified your money is. You have a LOT going on! 🙂

    Congratulations on your performance to target this year. It looks like we're both going to playing it close to the wire for 2014. I'm not sure about you Weenie, but I like it when it gets close and challenging. It makes it exciting, and it motivates me to make it happen.

    Thank you for the well wishes. I was at a wedding yesterday, and we had an awesome day. I hope you're having a good weekend too!

    Huw

  • Huw Davies

    Reply Reply 14th September 2014

    Hi Cerridwen,

    Thank you very much!

    I hope your Bond Funds and Corporate Bonds have been fruitful for you too. I think reading up on areas of investing you're unsure of is time well spent. You need to understand what you're investing in. Once I have a grasp of a particular form of investment I try it out on a small scale and see how it performs. The Bond Fund is an example of that for me. It seemed too good to be true. I read up on it, and then went for it.

    Good luck on your investment journey, and thank you for offering support!

    All the best
    Huw

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