I’ve had so many folks ask about this one over the last week since I first wrote about it that I thought I should quickly share an update.
This is from the ad for True Income, the new bond service from Stansberry & Associates, and just as when it was going out under the headline of the “Secured Investment Contract”, they’re teasing the idea of investing in high-yield corporate bonds (many of these would doubtless be called “junk bonds,” if that term is more familiar to you. Doesn’t necessarily mean they’re really “junk”, just that they’re not “investment grade” due to their classification from the ratings agencies.
Now the ad is going out in a slightly different form, saying that all you need to make a mint (well, 181%) is the top secret code — in this case the code in the ad is 925335AD3.
Just to complete the circle here, that is the CUSIP code for one of the corporate bond offerings from Vertis, an advertisting company I mentioned in my original writeup and that was also in the original ad.
The basics of this bond can be found at FINRA. According to them, this particular bond traded at $43 most recently, probably from a $100 “face value” at maturity though I haven’t checked that — that would give you almost a 150% return to maturity just on the principal … if you get your principal back. Big “If”, I’d imagine, but I don’t really know Vertis’ situation in detail. The rest of that teased 181% gain (though it’s carefully described as a gain of “as much as” 181%) would be from the coupon payments you should receive between now and maturity next year. With a coupon rate of 10% (roughly) on the $100 principal I’m assuming, that means your annual gain should be something like 25% if you buy at $43. So that’ show we add up to 181%.
I have no idea whether or not this company will prosper, or if the bond will end up getting returns along these lines. But on average in these cases, I think it’s fair to say that the potential return is high simply because most investors believe that the chance of getting that return is low. As I noted in my original writeup of this concept, there are probably ways to reduce that risk through careful analysis of companies, and diversification so that you’re not too reliant on one of these investments to succeed.
And as I also hope I made clear, I’m far from an expert in corporate bonds, junk or otherwise — don’t make any decisions based on my thoughts here, though I hope I’ve shared enough to help you understand the situation a little better. If you check out the original post make sure to read the comments, a few folks added some good information and perspective there, too.
FINRA, by the way, is a nonprofit that regulates the financial industry — this is the organization that was formed last year (or the year before? Not sure) when NYSE and NASDAQ combined their regulatory arms into one body. www.finra.org has great free data for bonds as well as lots of other useful information for individual investors.