How to Buy Australian Bonds
Australian bonds, issued by corporations, regional governments or the nation's federal government, may offer investors a relatively predictable investment. Though purchases of Australian bonds are easiest for residents of that nation, citizens of the United States and other countries may also purchase Australian bonds through large brokerages. Investors may choose to purchase individual bonds issued by a company or to buy a mutual fund holding a variety of bonds. Mutual funds will generally choose to focus on either corporate or government bonds.
Other People Are Reading
Instructions
-
-
1
Review individual Australian bond issues or bond funds independently or with the assistance of a licensed securities broker, who will also help facilitate the purchase of the bond or fund selected. Bond funds focusing on Australia are offered by many investment companies, including BlackRock, UBS and PIMCO. The PIMCO fund also contains bonds from New Zealand.
-
2
Determine how much risk you are willing to assume. Bonds from companies or governments in financial difficulty or strain will often carry a higher interest rate, but the higher rate also carries higher risks, as struggling companies may not be able to make interest payments or repay the bond. Safe investments will offer less risk but also a lower interest rate.
-
-
3
Determine whether you prefer to purchase an individual bond or a bond fund. Individual bonds may offer higher returns than a fund but could carry higher risks if the company struggles financially. The bond fund's diversified holdings offer protection against the problems of one company. Individual bonds may also be harder to sell if you wish to change your investment before the bond matures.
-
4
Select a securities broker to assist you in the completion of your purchase. There are two types of securities brokers: full-service and discount. Brokers in both categories should be able to assist you in the purchase of Australian bonds or bond funds. Your choice should weigh the complexity of your investment portfolio and your current investment advice needs. Merrill Lynch and Morgan Stanley Smith Barney are two examples of full-service brokers, while Vanguard and Charles Schwab are two examples of discount brokers.
-
5
Contact your chosen securities broker, either online or via telephone. Tell him which bond fund or individual bond you would like to purchase, and how much you would like to invest. The broker will complete your purchase by buying the maximum number of shares in a bond fund or units in a bond available for the amount you are willing to invest. The broker should give you a receipt to confirm your purchase and will then provide either monthly or quarterly updates on the investment's financial performance.
-
1
Tips & Warnings
If you are not an Australian citizen, brokerages may charge higher fees or require larger investment amounts before placing your order. Consider these fees while reviewing the various bonds or funds, as higher fees can diminish your long-term returns or profits.
A full-service broker will connect you with an adviser who handles a limited number of clients. You will receive a greater level of financial advice and assistance from the adviser but will also pay higher fees on investments you make. This choice is best if you have a large or complex investment portfolio.
Discount brokers typically operate online and offer less in the way of personal advice, though they do provide research tools. These brokers will charge lower fees and may be best for small investors who have relatively simple portfolios.
While Australian bonds, both corporate and government, are usually safe investments, they are not guaranteed to gain value or be profitable. Invest cautiously and after diligent research. Do not invest more than you can afford to lose.
References
Resources
- Photo Credit savings bonds image by Stephen VanHorn from Fotolia.com
