Post by martinde21 on Jan 11, 2018 20:25:10 GMT
Questions have been asked about the ease of selling Notes (the parts of bonds you own) on WiseAlpha, given forum comments that their secondary market is in early days and that the Notes are not liquid instruments which can be bought and sold freely on the open market. I thought I would give my objective feedback.
I recently decided to rebalance my portfolio and sold a tranche of senior secured Notes (i.e., not the unsecured Notes, the generic WiseAlpha Investment Bonds or the Smart Interest options). I went from the decision to sell to receiving cash in my account in about 5 working days, which by my book is very good and way above my expectations.
To sell Notes, there are a couple of pointers for others you may find useful:
1) You need to call the WiseAlpha helpdesk and ask the sell function to be enabled on your account. Otherwise it doesn't yet appear. The person I spoke to you actually enabled my account while I was on the phone.
2) While on the phone, ask the Helpdesk to send a link to a blog post on how bonds are priced, as the terminology is a little confusing.
3) You sell your Notes on the Market page, where a "sell" button appears next to your holdings.
4) You set the value of the Notes you want to sell in the "Principal" box. Check the blog post for the terminology. This is the amount you have invested, not the market value nor the holding value (which factors in the interest accumulated on top of the market value). The differences are crucial. If your principal was £1000 and the market value is £1100, you will make a profit of £100 on selling. If the market value is however £900, you will make a loss of £100 (not factoring in sales fees in either case).
5) The commission charged by WiseAlpha is peanuts really and not worth worrying about. You can't expect them to do this for free, realistically.
The ability to sell the Notes depends on the existence of a buyer. Mine sold in two tranches. WiseAlpha don't guarantee to buy your Notes. I don't really see why they should, otherwise you are transferring a significant amount of the investment risk to them. Perhaps with a larger market as the platform grows this will go away as a concern, as there will be more buyers and sellers all round.
My personal view is that corporate bonds offered by WiseAlpha are long-term investments for investors aware of the risks. They are subject to market volatility in their pricing and aren't suitable holdings for frequent buying and selling on a market. You can't, for example, set a sale price when you sell and you could make a loss if the market value is less than you paid. With many corporate bonds this happens at some point in their history, especially if their issue has a mixed set of results one year. But for me it's good to know that the market does work for the occasional secondary trade.
Hope this helps as food for thought.