Monday, July 16, 2012

Royal Bank of Scotland RBS Ladder Internotes for more yield.

Royal Bank of ScotlandRoyal Bank of Scotland (Photo credit: Wikipedia)
Where to put cash?

            Most income investors have a lot of cash around.  We tend to be conservative and follow the rules about having between 6 months and a year’s expenses in cash.   In the past, when we could get four percent or more in money market funds it made sense to keep cash in CD's or money markets.  However, today you feel like an idiot.

            A woman friend of mine had a fit when she redeemed her $100,000 certificate of deposit and received back $100,300.   Therefore, she bought a bunch of cheap real estate and is in the rentals business.

            Unlike my friend, I am not so good at fixing toilets and garage doors, and I do not like having to worry about the rent check showing up so I am stuck with virtually no income from my cash.

            If you are like me and would be willing to take just a little risk and buy internotes, you can create a nice ladder of internote bonds that do add some risk but pay you between 3.3 percent and 4.25 percent.

            Check out these two internotes from Royal Bank of Scotland.  These bonds trade in the US using US dollars.  The payments are monthly and they are trading at par.  Interest is one of our main sources of income and you might consider these notes for part of your cash position.

CUSIP 78012DAM5 7-15-2015 3.3%
CUSIP 78012DAN3 7-15-2017 4.25%

Very Truly Yours,


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