Marie, a retired academic and Kevin, a former medical professional, took great interest in developing the portfolio, working closely with Peter to expand and sophisticate it.
Today, the Macdonald’s have 20 corporate bonds in their portfolio, almost a quarter of which are US bonds. Investing in international as well as domestic bond markets has helped to further diversify their portfolio and improve returns whilst mitigating risk.
“The yield on our corporate bond portfolio at the moment is about 7.5 per cent. It’s balanced towards high risk for high return but we stress test it regularly to ensure that we are comfortable with the investment risk and it means we’re always generating enough income for us to live comfortably,” Kevin said.
“Unlike equities, you can actually predict what income and cash flow you’re going to receive from a bond and as retirees that’s invaluable,” he added.
“As retirees, if we want to remain financially independent we need to establish a cash flow that not only meets our budget but protects us against inflation.”
Kevin, who is now the chairman of his local Australian Investors’ Association discussion group has found that other investors his age know little about the asset class.
“Most people like to stick with what they know and for many, that’s equities and term deposits. The sad thing is that many of those people are getting such low returns, and it’s not enough when you’re retired and wanting to sustain your lifestyle.”
“Moving into bonds has been one of the best things we’ve ever done. It has provided us with the level of financial security we need and it would be great to see more investors, retirees in particular, consider bonds.”
“It really has made a world of difference.”
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