Fixed Interest Investments
We deal with a large number of retired clients and family trusts who wish to take a very Conservative approach with their investments and are looking for security and a regular income from their investments.
Fixed interest investing is not as simple as it may first appear and it is important to get some professional advice in this area. Plain old term deposits and NZ government bonds may be simple but there are plenty of other fixed interest instruments that need analysing a little more. We have access to a wide range of fixed interest securities with the most commonly used being the following:
Term Deposits
There is a wide option of basic term deposits available from mainstream banks and other financial institutions. Effectively you are loaning your money to an institution for a fixed period of time and will receive a fixed level of interest. In theory you should not access these funds until the end of the term, however most institutions allow you early access after paying a penalty. Most options offer good security and various terms. A useful website to check the various rates available is www.interest.co.nz
Tradeable Fixed Interest Securities
New Zealand has a secondary debt market where you can buy and sell fixed interest securities. There is a wide option of securities available including Government Bonds, Corporate Bonds, Capital Notes, Preference Shares and other subordinated debt instruments. Many of the securities have credit ratings from the likes of Standard and Poor's. It is important to be aware that most of the securities come with a fixed interest rate or dividend but the capital price may fluctuate depending upon market conditions and current interest rates.
New Issues
Through our relationships with various stockbrokers we gain access to the new issues that come onto the marketplace. Depending upon the particular issue these can be attractive as generally there is no cost involved to buy into a new issue.
Finance Company Debentures
There are a number of finance companies operating in New Zealand with many being privately owned. Over recent times we have seen a large number of collapses in this area which has led to a loss of confidence in the sector. Currently we would advise caution in the sector and suggest investors take advice before investing.
Fixed Interest Managed Funds
Investors can also invest into pooled fixed interest funds that use a fund manager to manage the overall portfolio of securities. We are not great fans of managed fixed interest investments as generally speaking we do not believe the costs involved in employing a manager make them efficient vehicles. These types of funds may be suitable for smaller investors but for our clients we tend to buy direct and rarely use managed fixed interest funds.