Bonds are issued by many companies – from well known companies such as BHP, Qantas and Commonwealth Bank to smaller companies such as G8 Education and Praeco.
Over 400 bonds are available via FIIG’s DirectBonds Service. Wholesale qualified investors can also invest in foreign currency denominated bonds, including USD, GBP and Euro bonds.
When you purchase shares in a company, you become a part owner of that company and there’s no certainty of income via dividends. With corporate bonds, you lend money to the company that issues the bond and it is legally required to pay you regular interest and repay the face value of the bond when the bond matures. This means that investing in a company’s bond is a lower risk than owning its equity or shares.
Another major difference between shares and bonds is that shares are generally traded on an open exchange such as the ASX, whereas the majority of corporate bonds are traded on the Over the Counter market.
Australian bonds have outperformed cash and Australian shares in the 10 years to December 2015:
Source: Gross returns for 10 years to December 2015, ASX 2016 Long term Investing Report May 2016.
Face value is the initial capital value of the corporate bond and the amount repaid to the bondholder at maturity. The face value of a corporate bond is set at the time of issue and is usually $100.