Many investors choose investments that allow them to plan their income to match their outgoings. It’s called ‘outcome based investing’.
The highly defined and predictable nature of bonds allows for this type of investment behaviour.
By selecting a portfolio of 7 XTBs so that 1 XTB per year matures, you get a portfolio with both capital and income payments each year. You would need to replace the XTB that matures each year to keep this rolling forward.
Filtering by maturity date is also called laddering. In the example below, we’re still selecting the XTBs with the highest yields, and then adding the laddering overlay.
In the 7 XTB portfolio below, approximately 1 XTB per year matures for an average Yield of 3.54%*
Selecting XTBs by Maturity Date
|ASX CODE||UNDERLYING BOND ISSUER||MATURITY DATE||COUPON TYPE||COUPON P.A.||INDICATIVE YIELD*|
|YTMF02||Bank of Queensland||07 NOV 2016||FLOATING||BBSW + 1.15%||2.221%|
|YTMMG1||Mirvac||18 DEC 2017||FIXED||5.50%||2.634%|
|YTMDOW||Downer||29 NOV 2018||FIXED||5.75%||3.374%|
|YTMAWC||Alumina||19 NOV 2019||FIXED||5.50%||4.881%|
|YTMAZJ||Aurizon||28 OCT 2020||FIXED||5.75%||3.856%|
|YTMQF2||Qantas||11 JUN 2021||FIXED||7.50%||3.792%|
|YTMDO1||Downer||11 MAR 2022||FIXED||4.50%||4.004%|
* Data as at 06 JUL 2016
Other ways to narrow your selection
There are a number of other filters you can use to narrow your selection. Some of these include: