Is investing in bonds safe?

To no one’s surprise, there has been renewed interest in government bonds in recent months, considered safe havens during troubled times.

While no investment is completely risk-free, in comparison to other investment options likes shares and property, government bonds are regarded as one of the safer investment types in the market, second only to cash at the less-risky end of the risk spectrum.

How bonds work

Bonds operate in a similar way to taking out a home loan — the difference is you’re the lender rather than the borrower.

When buying bonds, such as those issued by the Australian or US government you’re essentially lending them money for a fixed period of time at a set value. In return, these governments pay you regular interest, and at the end of your bond term, they’ll also refund your original investment.

If you decide to sell your bond before its term has ended however, you’ll receive the market value of your bond — what someone is prepared to pay for it — which could be less than your original investment.

Key benefits of investing in bonds

Reduced risk

Bonds are classed as a defensive asset class. They can provide a stable source of income while reducing your portfolio’s vulnerability to volatility in the share or property markets.

There are different levels of risk when it comes to bonds though.

With any bond, you are relying on the strength of the underlying borrower. The good news is that Australia is an excellent borrower. It’s one of just 10 countries in the world to have a AAA rating from the three major credit ratings agencies1. So lending money to our government is probably safer than to some other countries. Argentina, for example, has defaulted on its government debt nine times.

You can also buy bonds issued by large companies like Apple or Australia’s big banks. This is sometimes called credit investing. With corporate bonds, while you have the potential to earn higher returns, you face a higher risk. Unlike even the biggest companies, national governments can tax their citizens to help them pay their debts!

So, there is a chance you won’t get your initial investment back. Once again, you need to assess the underlying borrower – and remember that the higher the risk, the higher the coupon rate – and the other way around.


Having defensive asset classes like bonds in your portfolio can provide stability during volatile markets.

For instance, when interest rates drop, the value of bonds increase which is typically the opposite effect to shares. So, having a mixture of different types of investments can help to even out the impact of external market volatility on your portfolio.

Regular income stream

Like shares that pay dividends, bonds pay regular interest (also referred to as coupon payments) which can serve as a stable income stream and protect your investment from inflation.

How much you earn off this interest depends on how it’s paid. There are three options:

  • Fixed rate: when the bond is issued, the interest rate is established and remains the same throughout the term of your bond
  • Floating rate: as with a variable rate home loan, it can go up and down over the term of the bond. This means if interest rates increase, your payments will also increase
  • Indexed: your interest payments will change to reflect the Consumer Price Index

How to invest in bonds

Corporate bonds

One option is to buy corporate bonds directly from a company when they issue a public offer. A prospectus is then provided containing all the information about the bond such as the minimum amount required to invest, bond price, the bond term etc.

You can also buy corporate bonds directly from a stock exchange like the Australian Securities Exchange (ASX) or through a broker or managed fund but there are fees associated with this approach.

It’s also important to be aware that you’re essentially buying them second-hand via a stock market, so they are valued at market price rather than their set value when first issued.

Government bonds

You can invest in government bonds via the ASX, through a broker or a managed fund. You’ll also need to pay brokerage fees.

Bottom line: Bonds are not a short-term investment but they are regarded as one of the safer types of investment in the market. Talk to an adviser if you think they could fit in with your investment strategy.

At BlueRocke, our goal is to make you wealthier than you can be on your own. With appropriate advices, you may have a potentially improved financial position over time. Call Dev Sarker today at 1300 717 136!



Why super balances fluctuate

Should you worry if your super balance is fluctuating? Or is it a sign that you’ve got the right long-term, growth-oriented approach to your super….

The answer depends on whether your super choices are aligned to your needs.

For many Australian super investors—and there are 16 million1 of us—COVID-19 may have caused your super balance to change overnight.

In this article we’ll address the reasons for this and what it means over the short and long-term.

The COVID-19 crash

Your 2020 super balance has bounced around because COVID-19 has forced lockdowns around the world.

As the world’s economy largely depends on people getting together – in shopping centres, offices, stadiums, bars and airports—countries grounded to a halt.  As the crisis began to unfold in Wuhan, Lombardy, London, New York and Auckland – share prices tumbled too.

Impact depends on how your money’s invested

In 2020 super balances haven’t just fluctuated downwards. As Governments and central banks flung masses of cash at the problem (and a clearer picture of the virus’ weaknesses emerged), share prices soared back up. The US and German markets both had an increase of over 20% in the June quarter.

So, what do all these numbers tell us about the nature of your super balance?

Growth fund

It will fluctuate. And it will fluctuate in proportion to the percentage of growth assets in your super fund options. If you’re in a Growth2 fund where perhaps 85% of your money is in shares and property, short-term falls in the sharemarket will be reflected in your super balance.

Balanced fund

The same is true—but to a lesser extent—if you’re in a balanced fund where you could have up to 70% of your money invested in shares and property.


If you’re in Conservative or Cash options, your balance won’t move so much with the market as most of your capital is invested in low-return, low-risk options like cash and short-term government securities.

Higher returns mean more movement

The crucial point is that this movement—the volatility—is the price you pay for higher returns.

In fact, over 10 years, the average person invested in a Growth super fund outperformed those invested in a Conservative super fund by more than 2% per year3.

That may not sound much, but super is a long-term investment and two percent extra a year, compounding over decades, can make a serious difference to the amount of money you retire on.

Determining your comfort level with volatility

Every person’s super plan is different.

If you’ve got a long time till retirement and you can look past short-term changes in your super balance, you may find that taking a more aggressive approach with your investment options is ok. This means your portfolio would have greater exposure to higher risk assets like shares and property than those with lower risk, cash and fixed income.

As you get closer to retirement, or if your super is all you have to rely on in retirement, a more stable super balance could be desirable so more conservative investment options may suit you.

Take control of your super

The best thing you can do is review your investment options and make sure they’re tuned to suit your age, attitude to risk, current financial circumstances and long-term plans. Speaking with a financial adviser might make that review even more effective.

At BlueRocke, our goal is to make you wealthier than you can be on your own. With appropriate advices, you may have a potentially improved financial position over time. Contact Dev Sarker at 1300 717 136 today!


1 ASFA: The benefits of Australia’s compulsory superannuation system – June 2020
2 We’re using categories from The exact numbers may differ slightly depending on the investment manager you’re with. The principles remain the same.
3 Chant West: Super funds navigate crisis to deliver surprise result – 17 July 2020



Retirement: where to start

While many of us dream about the day we finally get to give up work and reap the benefits of our blood, sweat and tears, we often struggle to plan for it.

After all, in the scuffle of immediate priorities, saving and planning for retirement don’t always make it to the top of the pile.

But there’s a good chance you could be spending almost as long in retirement as you will be working. So, if you really want to end up with the retirement you envision, there are some things you can start doing right now.

1.  Determine how much you’ll need

Determining how much annual income you’ll need to maintain your lifestyle in retirement is key and will depend on the type of lifestyle you want in retirement. For example, the types of holidays and frequency,
where you’d like to live and your recreational activities.

Once you’ve estimated what your annual retirement income might be, you can start thinking about where you’ll be able to access it from such as your super, part-time work, or social security entitlements. You’ll also be able to determine your total amount of savings needed to meet your desired lifestyle.

A comfortable retirement

If you’re after a comfortable retirement lifestyle which includes a good standard of living and recreational activities such as some overseas travelThe Association of Superannuation Funds of Australia (ASFA) recommends that couples would need an annual income of around $61,909, while for singles this would be approximately $43,687.

Based on you owning your own home, having investment earnings of 6% per year and receiving a partial Age Pension, they estimate that the additional lump sum savings you’d need at retirement to supplement your income and achieve this amount of annual retirement income would be around $640,000 for a couple, while singles would need around $545,000.1

A modest retirement

If a simple retirement lifestyle­—that’s slightly better than being on the Age Pension—is more on the cards, ASFA estimate you would need a much smaller lump sum at retirement. However, the amount you’ll need depends on your investment returns and the amount of Age Pension that you’re entitled to.

Based on your circumstances, you’ll need to determine what Age Pension or other social security benefits you might be entitled to in the future and ensure that your other sources or retirement income will be adequate to fund your desired lifestyle.

Rising cost of living

Keep in mind that while you’re likely to have fewer expenses in retirement—you won’t be contributing to your super, you might pay less tax and may have paid off your mortgage—inflation can eat away at your retirement savings.

For instance, if you choose to invest conservatively by having your portfolio solely focused on defensive assets like cash and bonds, your returns may not be enough to offset the rising cost of living.

2.  Determine how long it will need to last

Once you have an idea of what your retirement lifestyle will cost, the challenge is to ensure your cash lasts the distance—however long that may be.

While no one can predict how long they’ll live, if we use the average life expectancy of 84.9 for males and 87.6 for females2, you can estimate spending around 20 years in retirement assuming you retire around 65.

3.  Are you on track to reach the lifestyle you want?

The next step is to evaluate how much you’re likely to have by the time you retire, if you continue with your current savings strategy.

And this will come down to a variety of factors including:

  • Whether you own your home
  • Value of your super and other investments
  • Return you earn on those investments and income from other sources
  • Your spending habits.

To understand where you currently stand, you need to add up any savings/assets you hold inside and outside of super minus your debts. Then factor in your future earnings and what you can save from those earnings. There are retirement calculators available to help with this.

4.  Not on track?

If you find that you may fall short in achieving your desired lifestyle on your projected savings, don’t panic. There are things you can do to turn your situation around.

Make additional super contributions

You can add more into your super on a regular basis using your before or after-tax income. Contribution caps are limit to the amount you’re able to contribute each year without paying additional tax.

If you make a personal contribution, you may be eligible to claim a tax deduction too. This means you’ll reduce your taxable income for the financial year and potentially pay less tax, while adding to your super balance. It’s a win-win!

Delay retiring or work part-time

If you’re flexible with your retirement date, one alternative is to consider delaying your retirement by continuing to work, or working part-time instead of retiring completely. Holding off your retirement, even for a few years, could significantly increase your retirement nest egg. And transitioning to by working part-time can help you prepare – financially, socially and emotionally – for what is a major change in your life.  Even if you’re continuing to work part-time, you might still be eligible to receive a social security payment or benefit – such as a partial Age Pension to help supplement your reduced income.

Reduce your debt

Having no debt, or very manageable debt, will reduce your money worries in retirement. You may want to consider a plan to proactively clear your debt by reducing the amount you owe, thereby strengthening your financial position when you retire. However, it doesn’t always have to be all or nothing in terms of diverting your available funds to reducing debt or contributing to super for your retirement.

Speaking to a financial adviser can help determine the best way forward, to manage your debt leading into retirement, while also making sure your retirement goals are on track.

5.  Seek professional support

Obtaining independent advice from a financial adviser can help you design a financial plan to achieve your retirement lifestyle goals—whatever they are.

Advisers can also guide you in deciding which investment options may help maximise your retirement income. Most importantly, they can help you plan for a retirement that suits you – whatever that looks like.

At BlueRocke, our goal is to make you wealthier than you can be on your own. With appropriate advices, you may have a potentially improved financial position over time. Contact Dev Sarker today at 1300 717 136!


1 ASFA Retirement Standard – June 2020
2 SuperGuide: How long you can expect to live and what it means for your super – January 2020


Guide to planning your estate 2020/21

Estate planning is about much more than preparing a Will.

This comprehensive guide will help you get started with how to plan an individual’s end of life care and their assets if they should become incapacitated or die.

Need advice? We’re here to help, call Dev Sarker at 1300 717 today!