Investing in Baby Bonds – TR007

What's safe like a bond but pays and trades like a high-yield stock? This episode is all about baby bonds aka exchange-traded debt securities. Our secret honey hole of income investing goodness.

This Week’s Total Return:

30.36%. 
18.38% capital gains + 11.98% income yield.

In this episode, you’ll learn:

  • What a baby bond is and how it differs from traditional bonds.
  • Where baby bonds fall in the ‘capital stack.’
  • How and where to buy baby bonds and my tips for investing.
  • Risks of investing in baby bonds.
  • The two baby bonds that I own and the ones I have on my watchlist.

Links and Resources Mentioned in this Episode

The Income Investors Academy

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Comments on Investing in Baby Bonds – TR007

  1. Susan says:

    Bond, Baby bond. Ahahaha – love it! These are great. I listen to them over and over to really get the language. The humor is fantastic – I love it.

    Here’s a question – is it a really bad idea to purchase a baby bond for more than $25.00? Should I watch and wait to pounce or move on and look for others once they cross over $25.00?

    1. Susan Lassiter-Lyons says:

      Thank God someone else thinks I’m funny! I was afraid I might be the only one. 😉

      It’s not a ‘bad’ idea, it’s just that it reduces your yield. For example, TANNI pays 8.25% at $25 par rate. So you get $0.52 per bond per quarter in interest for $2.08 a year and when it matures $25 is returned to you. If you buy it at a discount to par say for $24, your yield is 8.67% and you get $25 returned to you. But, If you buy it at a premium to par say for $26, your yield drops to 8% and when it matures, only $25 is returned to you. I advise to watch and wait until you can buy them for $25 (par) or less (discount). Your patience will be rewarded and you’ll make more $ overall.

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