The fact that the prospectus says the bonds are offered in 1000 denominations tells me par is 1000. A majority of bond face values are 1000 (very few have 100 par, and there's also baby bonds with par values less than that), but you can always give the bond desk a call where you're placing the order to confirm to make sure you don't get a surprise with your trade confirmation.
Ok thanks, I got that idea from the denomination part too but it's always nice to get confirmation. Right, I think I've got it all figured out now. Well the basics at least. Time to start looking more closely at all the options I have an hopefully during next week I will manage to make my first corporate bond investment!
Thanks for this post, I have learned a lot from it. With your scenario crimsong, gaining 2,000ish from 8 years seems like it's barely beating inflation. When would it make sense to invest in bonds? Or am I missing something?
First of all, I just randomly selected that starbucks bond as an example, I'm not going to be investing in that particular bond. But yes that barely beats inflation. Unfortunately with the current interest rates that is all you are going to get from quality companies. But it's still a lot better than keeping large amounts of cash and less risky than shares. I guess you could say that I'm choosing to invest in bonds in order to increase my residual income without risking the volatility that comes with dividend paying shares. So this is definitely one of those slow and steady investments.
Yeah, I now understand why you would choose to at least make some money with a less risky endeavor. In a way, it's kind of like a CD? Or are you able to pull your money back out before the bond payoff date?
Most bonds (like the Starbucks bonds) trade publicly. So you can't "pull your money out" like a CD, but you can sell your bonds. Depending on a number of factors, the price you sell for can be more or less than you paid.
Peakwealth answered that one pretty well. But yes I will use bonds as most people would use CDs... throw the money in there, enjoy the interest and wait for maturity date. Then repeat the process. The advantage (at the moment) is that bonds still yield a much higher rate than CDs. Of course that extra comes at the cost of a little risk but I'm fine with that.
Bonds are going to fluctuate in value at least a little until they mature, whereas the traditional CD just adds a little each month. CDs are also generally FDIC insured, whereas bonds are only as good as whatever country, municipality, or corporation issues them.
Well I did it yesterday: grabbed a bit of BestBuy 5.5% with a maturity date in 2021. Thanks again for all the help in this thread, it was quite a complicated process in the end (THANKS IB) but I did manage to get it done without too much fuzz and in the end everything worked out like it was supposed to. Still haven't decided how much of my portfolio I want in bonds but seeing as shares are quite expensive I think quite a large part of my new investments will be thrown into bonds.
