At Mintos, in addition to being able to invest in P2P loans, we can now also diversify our portfolio by investing in Bonds and from as little as €50.
But let’s first talk about what bonds are, in general, explaining it in a simple way. If you are already familiar with bond investing you can skip this part and move on to where I explain more about Mintos Fractional Bonds.
Contenidos
What is a bond?
A bond is a debt security between a lender and a borrower.
Unlike a loan, which is also a debt, a bond is issued by the borrower. That is, the one who needs the money. Bonds can be issued by a government or a company to finance projects or other needs.
Bonds are also often referred to as FIXED-INCOME investments because they have a fixed interest rate.
In exchange for the money borrowed, the issuer (which we said could be a government or corporation) promises to pay a specific interest rate, for a specific period of time and at the end of the bond it will pay the principal.
Some terms to know before investing in bonds are
Coupon or nominal yield: The annualised interest rate paid to investors.
Maturity: The date on which the bond ends and the principal must be repaid to investors.
Guaranteed: In a guaranteed bond, specific assets are pledged as collateral. If the issuer defaults on its obligations, it promises the bondholders (investors) those assets.
The collateral is an item of value, which could be money, goods, property, etc., that can be seized from the borrower if the borrower fails to pay according to the agreed terms.
If the bond is unsecured it is not backed by collateral.
Senior debt and subordinated debt:
When a company is liquidated, its creditors are repaid in a certain order.
Senior debt: senior debt must be repaid first, followed by subordinated debt.
So in the case of two bonds of the same company, one senior debt and one subordinated debt, if the borrower (the company) defaults on the bond, the company’s assets would be used first to repay the senior debt and only after that the subordinated debt would be repaid.
Why invest in bonds?
Advantages of investing in bonds:
- Regular and predictable income.
- Holding the bond until maturity recovers all the capital invested.
- Less volatility than company shares.
Disadvantages of investing in bonds:
- There is a risk that the issuer will default on interest payments or fail to pay the principal at maturity.
- As interest rates rise, the yield on newly issued bonds increases, causing a decrease in demand for older bonds and causing their prices to fall if they are sold in the secondary market.
Sign up for Mintos and start investing HERE
Mintos Bonds
Mintos bonds are fractional bonds. This means that we can invest in small parts of a bond, we don’t have to buy the whole bond. This makes it more accessible for us small investors and to diversify our investment portfolio.
At Mintos, you can invest in small fractions of bonds, starting from as little as €50.
how does investing in Fractional Bonds at Mintos work?
When investing in Fractional Bonds through Mintos, we are not investing in the bond directly, we are buying bond-backed securities.
In other words, we will not have direct ownership of the bond.
Instead, what we own are Fractional Bonds issued by a special purpose entity within the Mintos group, acting in the capacity of issuer.
The issuer of the Fractional Bonds (that SPV, special purpose vehicle) owns the bond and passes on the yield generated to us investors.
These Fractional Bonds are only available from Mintos. They are exclusive to Mintos and cannot be transferred to other platforms. We will be able to sell them on the secondary market on Mintos, but only here.
Each Fractional Bond has a unique International Securities Identification Number (ISIN).
what are the fees associated with investing in Fractional Bonds?
You can invest in Fractional Bonds without having to pay any fees.
Selling on the secondary market may incur some fees.
what are the differences between Fractional Bonds and traditional bonds?
Traditional bond
Normally the minimum investment is about 10.000 Euro.
The investor owns the bond.
Fractional Bonds in Mintos
Minimum investment from as little as 50 Euros.
Investor holds bond-backed securities.
The risks are similar in both cases. These include defaults by the bond issuer, market risk, interest rate risk, inflation risk and liquidity risk.
how to invest in mint fractional bonds?
After registering on the platform you will need to go to the Bonds section, where you will be able to see which bonds are currently available for investment. Entering each bond you will be able to see the basic information and also download in PDF all the information of the fractional bond and the underlying bond.
All you have to do is decide how much, starting from €50, you want to invest and the bond will start earning interest on the set execution date.
Register with Mintos and start investing HERE
Tax withholding on bonds
Just like when you invest in notes (loans) at Mintos, when you invest in Mintos Fractional Bonds, you will also have 5% of the interest received withheld (for EU residents)
When you file your tax return you will be able to deduct this withholding tax, which has already been applied, to avoid double taxation.
Here you can find more information on how to declare crowdlending investments in Spain.
My opinion on Mintos bonds: will I invest in bonds?
Mintos bonds can be interesting to diversify my portfolio, however, so far I haven’t seen one that really brings something different to what I already have in my investment portfolio.
A bond like the first one they launched from Eleving Group does not provide diversification as, although they are not P2P loans, it is an investment in the same sector.
However, although it does not provide diversification, such a bond can be interesting because of the high interest rate it offers (13%) and being long term it can be a good opportunity to trade the bond in the future when interest rates go down, selling it at a higher price in the secondary market or waiting until the end and receiving the good interest rate it offers.
I find it very interesting that Mintos brings us other different investment opportunities in a single platform that we already know and is easy to use. With bonds and ETFs, it offers us an easy investment, from small amounts to be able to diversify and, something also very interesting, without commissions.
And you, do you want to invest in bonds at Mintos? Register HERE
