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Govt Bonds

Discussion in 'Beginner's Lounge' started by Forest, May 6, 2019.

  1. Forest

    Forest

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    Hello, I have a few questions re govt bonds and whether it is worthwhile to do this.
    I'm looking for something that is low risk and hopefully with no capital gains tax.
    I'm new to the workforce (24 years old) and have managed to save a small sum. I have travelled extensively in the past few years and this has taken its toll on my savings. I'm wanting to invest some money away for a number of reasons, one being so that I can't spend it.

    Aust Fed Govt bonds and state bonds - I looked into QLD bonds and the interest dividends are around the 1.27% per quarter mark or 1.27% half yearly. I asked the person at Link Market Services about which one was best but all she said was for me to find a financial advisor. Likewise I asked her if there was a capital gains tax on govt bonds and she would not answer.

    Where would be best for me to park around $30,000? Is it worth buying shares with this amount? Are govt bonds currently worthwhile?

    Thanks
     
  2. Zaxon

    Zaxon The voice of reason

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    It all comes back to comparing bonds with their alternatives. Here is a sample of government bonds I grabbed. Have a look at the yield column.
    upload_2019-5-6_15-57-22.png

    I can get 2.9% by sticking it a savings account at my bank. And if you want it "locked away", you can use term deposits. That's your benchmark. The sorts of returns I'm seeing on government bonds isn't comparing with that, in most cases.

    The other downside of bonds in general, is that their capital isn't secure. Their value fluctuates. Unlike a bank deposit, they're a risk product. If my money is at risk, I want a much higher return.
    Yes to shares. You can park your money in a cheap, broad-based index fund and get around 11%. But be prepared to leave it there for 7+ years, say, as the market can fluctuate quite a lot.
     
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  3. Forest

    Forest

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    Thanks for that. What exactly is a cheap, broad-based index fund?
     
  4. Zaxon

    Zaxon The voice of reason

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    VAS is an ETF that covers the ASX S&P 300 with really low fees. IVV is an Australian ETF, but follows the US S&P 500. Both good examples.
     
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  5. Forest

    Forest

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    Thanks! I'll do some research into all that information :)
     
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