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Bought Walmart bonds

November 2nd, 2009 at 02:06 pm

This isn't exactly exciting or anything, but I decided to go ahead and buy a batch of Walmart bonds. I needed a certain amount of bond position anyways, and Scottrade will buy them for you for free. Plus, there's no expense ratios involved, and I think Walmart bonds are pretty solid.

The "downside", if you want to call it that, is that you can't pull them out until they mature, which will be two years from now for mine. The interest for the 2 year is 5% per year, and this is done through the Roth so no capital gains tax.

While I've bought stocks for a little while now, I confess this is the first time I've bought individual bonds. Sure, I've had bond funds before, and still do in 401(k), just not individual bonds.

Also, I've noticed that some bonds are more expensive than others. I thought the Walmart bonds were relatively pricey at $108 a piece, but I guess that's also what happens when you buy something that seems to be in demand....

The final thing I'm hoping to do for 2009 is to shift some of my rollover money into the Roth as well. Of course, I'll have to pay taxes for it, and truth is, I'm not sure if I have the spare cash to pay for the amount I want to convert. We shall see though.

Anybody ever bought bonds? If so, how did that work out for you?

5 Responses to “Bought Walmart bonds”

  1. Single Guy Says:

    Huh? Ok, I am *very* interested. I have money in a Roth with Scottrade just sitting there until I figure out what to do with it. There's no purchase charge? Did you do it online, or did you need to go to one of their offices to do this?

    I hope you don't mind me asking.

  2. thriftorama Says:

    Hmm. I had never considered an individual company's bond. Wal-Mart seems like a sure bet.

  3. Broken Arrow Says:

    Single Guy:
    There's no purchase charge, but another catch I didn't really want to mention is that they won't do it unless you buy a minimum of $10k at a time (and in increments of $1k after that).

    Yes, this is something you can do online. Simply go to the bonds section, search through the bonds based on whatever parameters you may have in mind, and... you just buy there. Also, be sure that 3rd party cookies are checked for it to work; something I learned the hard way.

    After that, if you want to try to get rid of it early or do anything else, you will have to call your branch office.

    But again, there's no trading fee, no expense ratios, and no sales charges. Nothing. It's actually pretty impressive I think.

    thriftorama:
    Yeah, well, corporate bonds, are generally considered risky... and maybe 98% are. But that's also why they can pay so much, especially in this recession. So, to me, the idea here was to find that 2% that are not, but are simply taking a beating by proxy because of the economic condition right now.

    That and you are also not diversifying, which even with bonds is something that should be recommended for passive investors.... But if you don't mind the relative risk involved, then I don't think this is a bad way to go after higher returns.

    I specifically picked Walmart because, well obviously, I think it's a pretty safe bet. After all, it's the only Dow Jones company that actually made profit through the 4th quarter of 2008. Discount retailers actually have been doing well, unlike their boutique cousins, but unlike Big Lots or Dollar General, Walmart is simply huge. I'm so confident they won't default that I would literally bet my life on it, not just money.

    Besides, the term is only 2 years, but that's nothing in return for 5% interest. In fact, they had batches available for 7% payments! The catch though is that they would not mature until 30 years from now.... Hmm, maybe even then, it might not be a bad idea, especially if you want to stabilize your the growth rate for some of your money....

    But anyways, I figured since it's my first time buying individual bonds, I thought I'd baby step it and try the 2 year one first.

    Hope that helps!

  4. Single Guy Says:

    Thanks for the info. I don't have 10K available right now in the Roth, though that could change soon! I just heard Berkshire Hathaway is buying BNSF, and it happens I have maybe another $5K of that stock in the Roth, so I don't know what that means for my holdings (stock swap / cash out?) If they send me a check for that stock I would have $10K free. Oh well, I'll have to see.

  5. Jay Says:

    Just make sure bonds are rated aaa and are insured.

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