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State Savings 10 Year Bond

  • 25-02-2013 08:07PM
    #1
    samsamson
    Registered Users, Registered Users 2 Posts: 376 ✭✭


    Hi guys,

    I'm risk averse but have a very good ability to save.

    I'm looking at the NTMA State Savings 10 year bond. It's got a tax free 35% lump sum at the end on top of annual 1% payments subject to DIRT. All in, the yield is 41.7% over ten years without any nasty taxes or charges on top of it.

    I'm hoping for a best case scenario of beating inflation over the ten years by a percent or two but worst case scenario (ignoring default, obviously) I'd not lose any of the principal and wouldn't fall too far behind inflation.

    Are there any better options out there for a risk avoiding investor like myself? I know if saw my portfolio drop too much in value on the stock market I'd panic and sell and just lock in my losses.

    Is there any way of knowing/estimating future inflation levels? Is it possible inflation could hit 3.5% or higher and stay there for an entire decade?

    Many thanks for your thoughts,

    Sam


Comments

  • #2
    jank
    Banned (with Prison Access) Posts: 13,018 ✭✭✭✭jank


    TBH no one knows what the future holds in relation to bonds and inflation. There is so much debt out there that it is almost inconvieable the the euro inflation will stay as low as it does at the moment. If you are concerned why not go for bonds with a shorter life span? Say 3 years?


  • #3
    studdlymurphy
    Registered Users, Registered Users 2 Posts: 832 ✭✭✭studdlymurphy


    jank wrote: »
    TBH no one knows what the future holds in relation to bonds and inflation. There is so much debt out there that it is almost inconvieable the the euro inflation will stay as low as it does at the moment. If you are concerned why not go for bonds with a shorter life span? Say 3 years?

    How would you go about going for bonds?


  • #4
    jank
    Banned (with Prison Access) Posts: 13,018 ✭✭✭✭jank


    You can buy them or trade them :)

    Check out anpost.ie I think they sell NTMA bonds, NIB I think lets you trade bonds. Or you could buy into a fund that provide bonds as collateral.


  • #5
    bridgepeople
    Closed Accounts Posts: 72 ✭✭bridgepeople


    Hi Sam. Given your extremely low risk tolerance, then I think the 10 year savings bond is not a bad option. Take a look at prize bonds too. I do not think buying individual bonds through a broker would be a good option for you as the price of these can fall if interest rates rise.

    Other options that might suit you would be to use the money to pay down your mortgage or else make a one off contribution to your pension pot.


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