Question 1: What are your thoughts on XTBs?
Answer: I think XTBs (exchange traded bonds) are fine but because the yield-to-maturity is so low (generally under 2%), they’re pretty unattractive. Unfortunately, we don’t have a strong corporate bond market. Retail investors are essentially “incentivised” by the banks (paid higher rates than institutional investors due to various APRA liquidity measures) so it’s very hard to go past term deposits for fixed interest investments up to five years. If you think interest rates are going to fall or are prepared to consider “non-investment grade” risk, or potentially want a term of more than five years, then consider XTBs. Otherwise, stick to term deposits or access the market with a diversified portfolio from a manager.
Question 2: As a retiree, I value bank dividends but am underweight banks due to concerns about concentration risk. Can you comment and suggest some additional higher dividend stocks outside the top 50?