I'm looking for 5.5% interest or higher with a small amount of risk

SomeGuyOnOzB on 29/04/2015 - 22:33
Last edited 01/05/2015 - 13:53

I'm a bit rusty on this but I'm looking for fairly safe investments with higher interest rates (than online savings and term deposits).

I know one way used to be if any companies wanted to issue credit (?) notes on the share market.
The company was basically borrowing money from the public and other companies, instead of banks.

Capital would be pretty much guaranteed by the borrowing company and payments would be set at several percent higher than bank savings account rates.

If anyone knows what I'm talking about, knows of any upcoming releases and doesn't mind, could you let me know what's coming up and what kind of rates are being offered these days?

Alternatively, if anyone knows of anything else with similar levels of "safety" that offers around 5.5% p.a. or higher, would you mind dropping any pointers?

Thanks in advance :)

UPDATE - the title originally said "fairly safe" which some people thought I meant "no risk". I have changed the title to say "small amount of risk" which I realize is again, a subjective phrase.

Financial

Comments

  • digitalbargain on 29/04/2015 - 22:43

    more risk, more reward and vice versa.. also, nothing is going to be guaranteed except low yielding gov't bonds and even then, they really aren't technically guaranteed.. 3-4% seems realistic for low risk 'cash' investments at the moment..

    if anyone knows of something 'guaranteed' at 5.5% i'd also love to know!

    • SomeGuyOnOzB on 01/05/2015 - 09:51
      +1

      I've also just remembered, if you go over $250,000 in an "authorised deposit-taking institution" (and it's rebranded divisions), the amount above $250,000 is not guaranteed.

  • cpho on 30/04/2015 - 00:52
    +1

    mandatory disclaimer: not financial advisor, cant sue me, no responsibility etc etc.

    Subordinated notes/ Capital notes are the ones you're thinking of. Look for floating rates, so they remain rate-sensitive, meaning they're always a certain margin above the bbsw. (essentially, if rates go up, you get paid more, if rates go down, you get paid less).
    You don't have to wait for a book build (which usually have a minimum investment of $5k), because most notes have trading codes on the open market, so you can buy/sell whenever.

    • SomeGuyOnOzB on 30/04/2015 - 08:15

      Thank you cpho :)

      That is the information I was looking for.

      I will Google it now; see what I can find about rates etc.

  • GnarlyKnuckles on 30/04/2015 - 01:02

    You cannot get 5.5% return without risk. You can 'gamble' on things like stock-trading, precious-metals, currency-trading (etc.) in a relatively conservative way, such that all you really lose is your time to do the research that MIGHT get you a decent percentage; and if things go in the reverse direction than the one you predicted you potentially also lose the 3-4% you could have got with a truly risk-free investment…
    But in the current market there is no way to get even 5% "risk free", and that won't change for a long time yet; the next RBA rate-adjustment is predicted to be down (or no change); not up.

  • SomeGuyOnOzB on 30/04/2015 - 08:13

    I know it's not risk free. I don't consider anything, not even savings, risk "free".

    It's ALL degrees of risk. (eg State bank of Victoria closed in 1990 after the 1980s crash)

    However, a loan to a top 100 by capitalisation company, is something I would be interested in hearing more about.

    • GnarlyKnuckles on 01/05/2015 - 01:12

      "(eg State bank of Victoria closed in 1990 after the 1980s crash)"

      I don't know why you cite this event in the context of 'risk'; no one lost the money in their bank accounts when this happened.

      • SomeGuyOnOzB on 01/05/2015 - 09:34

        As you point out, and it's true, getting all the base money back eventually is better than getting none or just some. (Though I think some potential interest was not realized)

        Now I've got very limited information about the follow up but, do you know how quickly people got their money back after State of Victoria bank went under? Did they got their interest etc?

        Thanks

  • CheapandUsed on 30/04/2015 - 09:39
    +1

    not advice in any way

    Bendigo and Adelaide bank are issuing CPS3 - convertible preference shares. They expect to pay 4-4.2% above the bank bill swap rate so could be 6%+ p.a. Check the announcement on the ASX.

    If you feel that Bendigo bank is a safe investment it could be worth a look.

    • SomeGuyOnOzB on 30/04/2015 - 21:04

      Thank you; definitely the kind of thing I am intersted in (Then I would get the 100+ page prospectus and read all the rules etc)

  • [Deactivated] on 30/04/2015 - 10:43
    +1

    Have you tried lending money ? Go to ratesetter . Com. .au

    • SomeGuyOnOzB on 30/04/2015 - 21:05

      Interesting; I will look into that. Thank you :)

  • strikerzebra on 30/04/2015 - 10:53

    Invest in an index fund suck as VAS - Top 300 shares, STW top 200 shares and reinvest your dividends and you should beat 5.5% easy. Be aware there is some risk

  • Cheap Steve on 30/04/2015 - 12:05
    +5

    Try googling these companies - Australian Capital Reserve, Westpoint, Bridgecorp and Fincorp.

    For Ozbargainers with longer memories I add - Cambridge Credit Union, Pyramid Building Society, Estate Mortgage.

    Always remember, the return of your money is more important than the return on your money!

    • OzBestDeal on 30/04/2015 - 12:35
      +3

      the return of your money is more important than the return on your money!

      catchphrase of the day!!! very true…

    • cpho on 30/04/2015 - 19:43
      +1

      Always remember, the return of your money is more important than the return on your money!

      Had to read that 3 times. Skim reading isn't good :/
      Good phrase though!

    • SomeGuyOnOzB on 30/04/2015 - 21:08

      Agreed. Very true.

      Thank you; I will look into those companies. :)

      Update - just realized you mentioned Pyramid … suspecting this is along the lines of Victoria State Bank; although Victoria State Bank highlights that any bank can also go under

    • SomeGuyOnOzB on 30/04/2015 - 21:36

      You make an important point, but also, it is possible to get subordinate notes from ANZ, for example, if someone wanted to, and get 5%+ versus a straight loan to the bank for 1 to 2%.

      (I'm guessing though a straight loan is covered by a government guarantee, should the bank go under)

    • SomeGuyOnOzB on 30/04/2015 - 21:09

      Thank you :) I had not heard of these.

      update - very interesting … though I'm not quite across the impact of the management expense ratio

      • Cheap Steve on 30/04/2015 - 23:16
        +1

        An ETF is basically a managed fund listed on the ASX. The MER is the manager's fee which is trimmed off the gross return.

        I would be very wary of the past performance figures of 10% plus quoted in the article as "past performance is no guarantee of future performance". Most of the 10% would be from capital gains off the back of falling interest rates over the past 12 months. The actual yields from these ETF's would be well below 5.5%.

        • SomeGuyOnOzB on 01/05/2015 - 09:31

          Thank you Steve.

          Also, would the yield be on performance before the MER is charged?

        • Cheap Steve on 01/05/2015 - 16:15
          +1

          @foundit:

          Not sure if I am answering your question, but past performance figures are usually quoted after MER's have been deducted.

          The MER's on fixed interest ETF's are at the low end of town.

        • SomeGuyOnOzB on 01/05/2015 - 21:39

          @Cheap Steve:

          Thanks Steve. After the crash a few years ago, I'm still wary of most of the share market and attempting to trade it.

          For now I'm more interested in fixed interest ETF's, sub-ordinated notes, resettable preference shares etc

  • lentildude on 07/05/2015 - 09:56
    -2

    rabo online term deposits are always best in oz. You need to lockup fr 5 years tho. My last one was 3.8%. I think they are about 3.5 now and only mention it as they will be dropping it down again by end of this week. Not the 5% you wanted but close with no risk.

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