Bonds are less likely to get your heart racing, but you’ll sleep more soundly, says Gaby Rosenberg, co-founder at Aussie fixed income investment app, Blossom.


I’ve spent the last few weeks looking at the proliferation of investment platforms and apps.

Lots of fun.

So far, however, the only people I’ve called are Ali and Gaby Rosenberg for a brilliantly unsexy idea they’ve appropriately and rather gently called Blossom.

Instead of making equity bets on your mobile phone or waiting six months for your term deposit to mature, here’s a little Aussie gateway which provides safe and easy access to a professionally managed portfolio of A-rated bonds.

First up, I’m late to the party, says Gaby.

Blossom’s been going since COVID, but in this age of crypto-fireworks, memestocks, and Buy Now Pay Laters at last, I thought, here’s a ‘democratisation of investing’ idea which hasn’t got a whiff of witchcraft or sulfer about it.

And, mate, in an uncertain economy – or at least one in which uncertainty has become the norm – the reliability and stability of this type of investment holds strong appeal.


Bond investing – the secret to sleeping well at night

“We started the Blossom app with the aim of bringing fixed income to the everyday investor,” Gaby told Stockhead last week.

“Bonds are a kind of cloistered industry – one which has traditionally high barriers of entry in terms of knowledge, financing and access. The world of fixed income is a privileged one; it’s known for high minimums and lockups and it flies well under the radar.

“And we wanted in. And when that was proving to be mind-numbingly painful, we wanted a solution that us, as thwarted investors wanted.”

And then she built this Blossom App where now any little Aussie can get access to quality fixed income, for like, as small a dip as $5.

Eh. But this isn’t about plugging their toy, even if it looks great.  This is about plugging bonds, which – let’s be honest – don’t.


The Feudal Option

Fixed income bonds are based on a pretty simple premise: an investor lends money to a borrower for a specific period, in exchange for agreed, regular interest payments.

“While it may not deliver the thrills of growth stocks or involve household brands you can namedrop with friends, fixed income has been around since medieval times, and it’s still going strong,” Gaby says.

“Until recently, it was also as tricky to navigate as the feudal system.

“Assets were difficult to access directly, complicated, and designed for people who didn’t need money in the first place.”

However, nudge, nudge – times are changing.

“Today’s investor is empowered, informed and looking for new ways to balance their exposure to risk, bringing forth a wave of new fixed income offerings which are convenient, accessible, and pride themselves on low barriers to entry for retail investors.

“It’s what enraged and then inspired us to go get everyday investors some exposure to Fixed Income Bonds in a way that’s beneficial, but also flexible and accessible.”

The two don’t often go hand in hand, Gaby adds.

“The bond market has also undergone a transformation, embracing electronic trading platforms, which allow direct investment and increased transparency. It enabled the expansion of bond ETFs (Exchange Traded Funds) – giving investors access to fixed income markets, whilst enjoying the flexibility of trading on stock exchanges.

“The sum total is a win for retail investors, enabling more efficient, cost-effective investing.”


Gimme Shelter: Fixed Income Bonds

Earlier this year, Sally Auld, chief investment officer at JBWere said fixed income would be the rising star of 2024 and would remain a key component of portfolios given the current attractive valuations.

“Rising interest rates and geopolitical tensions make fixed income an attractive proposition… We prefer long duration positions in government bonds and exposures in high quality Australian dollar credit to anchor the fixed income component of portfolios.”

Gaby says that in the current market, investment strategies that focus on protecting wealth have become the main event, rather than just a back-up plan.

“In a bid to avoid the swings of the stock market and the unpredictability of inflation, investors seek out returns they can depend on,” Gaby told Stockhead.

The whole concept of bonds is that they offer precisely that – a focus on preserving capital, shielding investors from the volatility and vitriol, the uncertainty and the tumultuous ups and downs of equities.

“Bonds bring investors closer to one thing that’s priceless: peace of mind,” she says.

And it’s a good line.

“Bonds work by lending money to governments or corporations in exchange for regular interest payments, and the return of the initial investment at a later date. They’re often diversified, spreading risk across a variety of assets; while one asset may experience a downturn, most others might rise, delivering more stable returns overall.

“This diversification not only brings a more robust, sustainable element to a portfolio – it also smooths out some of the bumps of market fluctuations.

“All that being said, perhaps the most appealing feature of fixed income bonds is simply the most obvious one: access to consistent, predictable returns.

“The global economy over the last five years has taken some hits, along with anyone who has bumped up against it… an opportunity to make money with added reliability and restful nights is something we’d all appreciate right now.”

Word. But there’s always a but. What about fixed income risks?

“A well-diversified, balanced portfolio usually includes some allocation to fixed income, but like any investment, it also carries its own set of risks.

When interest rates rise, the value of existing bonds tends to fall, and vice versa.

Gaby says this risk is mostly relevant for long-term bonds.

“But if you own a bond with a fixed interest rate and market interest rates rise, the value of your bond may decrease because investors can buy newly issued bonds at higher rates.

“Likewise, if inflation rises faster than the yield on your bond investment – the purchasing power of your returns may decrease over time.”

The other thing which is rare as hen’s teeth or poor governance – there’s also the chance that the issuer defaults.

“However bonds issued by governments and financially stable institutions typically come with low risk of this… Generally, fixed income bonds offer lower volatility and more stability compared to the alternatives.”


Fixed income bonds in Australia

“While Australia’s bond market may not be as large or liquid as other major economies (e.g. the US or Japan), it has grown significantly in recent years, and yields have been relatively high in comparison to the big players,” Gaby says.

“This may be because the Australian bond market relies heavily on government bonds issued by the Commonwealth Government, known as Commonwealth Government Securities (CGS), as well as bonds issued by state governments and corporate bonds.

“We also run a tight ship when it comes to regulation, with bodies like Australian Securities and Investments Commission (ASIC) and the Reserve Bank of Australia (RBA) focused on market integrity, transparency, and investor protection.

Australia’s sovereign credit rating is AAA, one of just nine countries worldwide to be rated so highly by all three major credit rating agencies – although credit where credit’s due, these are the same ratings agencies that were in The Big Short, with My Ryan.

Our strong credit rating means Australia has access to funds at lower rates and an ability to offer higher quality and lower risk, compared to bonds from other countries, Gaby says.

“This makes it attractive to both domestic and international investors on the hunt for more stable and profitable investments.”

“Okay. Bonds are less likely to get your heart racing, but you’ll sleep more soundly knowing they’re a confidently safe store of value – and a good night’s sleep is a commodity everyone is looking for.”