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 £950. The 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?
Labels: Stock Purchase