Yes it's definitely one of the most complicated secondary markets I've used - largely because of the structure of the long term debentures with fixed annual interest payments despite reducing capital outstanding. It really needs a calculator like ABL which tells you the effective yield.
I see it this way. The return is typically 6%, the SM markup is typically 9%, so the answer is it takes 1.5 years until you start to see a return - no thanks. (Figures from memory)
That's not a very useful approach on abundance where many of the long term debentures' payment structures result in the return increasing through time (and accrued interest is not paid for separately). Hence it's perfectly possible to buy at a premium and still achieve a higher return than that originally quoted.
That said some of the premiums paid do look too high for me.
Post by GentlemansFamilyFinances on Apr 23, 2018 14:31:36 GMT
One good reason for buying debentures on the secondary market is that you get a share of an existing asset which is generating energy and money. Your money starts working right away!
Investing in a new project might mean that it takes weeks or months for the project to go ahead and you'll earn nothing over that time.
You can also get exposure to any number of investments for a bit of diversification.
Long time investor in P2P Lending - I've seen the good, the bad and the ugly! I have a blog that you can have a look at - covers personal finance, family life and our family journey towards FIRE. gentlemansfamilyfinances.com/ My blog contains referral links which you should be aware of.