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Potential bond investment with 4-5% stable returns?

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time lapse photography of vehicles on highway

Fancy a 4-5% return every year? Assuming, it’s stable and recurring? Well, there are a lot of people having Fixed Deposits with 2% returns today.

I do think most people would think it’s too low. As someone at 44 years old, I think I do agree as well. I mean, 4-5% returns per annum? Even if it’s stable, it’s still too low. Well, if we look around the government bonds from the US to the UK to Germany, Japan and Australia, then this 4-5% yield is REALLY SUPER HIGH. If we look at the typical Fixed Deposit Rates of today (year 2021), then this 4-5% yield is double or more. Briefly, it’s high enough due to the current low interest rate environment. Then again, this is the perspective of someone who just want a stable return, year after year.

For the rest needing much higher returns, bond fund is definitely not a good choice. Here’s one more potential return which is like a bond. It is speculated to give 4-5% returns every year.

Article in theedgemarkets.com Gamuda Bhd confirmed today that it is currently in talks with the government to put forth its proposal to sell its four highway concessions to a private highway trust. to be known as Amanah Lebuhraya Sdn Bhd. This trust will fund the acquisitions by raising money from bond investors with a promised annual return of 4% to 5% backed by cash flows from the tolls without any need for government guarantees.

Gamuda also said, “We also affirm that the proposal involves keeping the current toll rates unchanged with no further increases, with a short concession extension in order to fully recuse the government from paying any compensation (as is legally required of them as per the current concession agreements) for keeping the toll rates as they currently are, for the entire proposal period.”

“In our proposal, the government would have no stake nor interest in the buying entity, and therefore need not spend any of its own monies in the acquisition and further, need not provide any government guarantee.” Please do read the full article here: Article in theedgemarkets.com

Paying toll, yes. Earning returns is yes too.

If you ask me if I prefer to pay higher toll but with a shorter period, my answer is to pay the exact same toll for a longer period of time. Let’s remember that with diminishing value of money, the RM2.50 we pay today will be way lower than RM2.50 10 years down the road. Our salary would have been higher too. This is why I think this proposal from Gamuda is fine and in fact some people with money in FD may switch some of their FD into this bond for a higher return instead. Now, we just need to wait for more details since this is already in progress.

By the way, this is as low risk as it could be already yeah. The tolls should retain its popularity and whether we drive a petrol engine car or an Electric Vehicle (EV) we still have to pay toll. This will also enable Gamuda to get back ‘firepower’ for their other businesses. Meanwhile, the government can now move away from having to subsidize the toll operator just to ensure the toll charges stay the same year after year. Till we have the next update, take care.

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