Risks of Corporate Bonds

Risks of Corporate Bonds

3/15/2023

I often warned clients about risky corporate bonds.


In February, a major bond issuer, Premiot Group, admitted financial problems. The crash of the former Fair Credit group also affected a large number of investors. Most small creditors considered their investment reliable and safe, often based on recommendations from financial advisors.

You can read the news in the links below.

These cases, however, are just the tip of the iceberg. I'm afraid we'll see similar news much more frequently this year. Due to the relaxed legislation regarding corporate bonds in the Czech Republic and last year's inflation, many companies capitalized on Czechs' fear of an uncertain future. They issued corporate bonds and lured clients with unrealistically high yields. Now they just shrug and can't even pay interest, let alone the principal.

The fact that the investor bears the risk is hidden in small print in the contract. Moreover, most corporate bonds are not freely tradable. In other words, they cannot be easily sold if you need money quickly.

Mantra: PROSPECTUS APPROVED BY THE CZECH NATIONAL BANK  The CNB approves the formal side of the bond, but certainly doesn't guarantee anything, recommend, or evaluate the issuer's financial situation or economic results. Just for clarification. 

Keep in mind, the greater the promised returns and unrealistic appreciation, the more cautious you should be. 

If, despite all this, you still want to include corporate bonds in your portfolio for a little variety, I recommend at least following the ten recommendations of the Czech National Bank under the following link  http://bit.ly/3YODegX 

Is there anyone among you who has invested in corporate bonds? I would appreciate your opinions and experiences. 

Links to articles about Premiot Group and Fair Credit:
- http://bit.ly/3EujG9f 
- http://bit.ly/3xK0v7y

Interested in how you can invest safely? Or would you like to discuss your portfolio?

Do not hesitate to contact us

Contact

Ing. Petra Štěpánková, MBA, EFA

+420 604 218 602

petra@meliorinvest.cz

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