INDIVIDUAL BONDS
While it is possible for you
to buy bonds yourself, it’s
not always straight
forward and it could be
quite expensive or need a
prohibitively high
value investment.
Funds
You can invest through a fund that
pools your money with other
investors’ and holds a range of bonds
at once. A professional fund
manager invests on your behalf
and will aim to achieve a
specific objective.
Different countries and companies have different abilities to repay debt and track records in doing so. Each has its own credit rating to reflect the investment risk of lending money to them.
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GOVERNMENT BONDS issued by national governments
CORPORATE BONDS issued by companies
Investment grade bonds
are those issued by lower
risk borrowers.
High yield bonds are those issued
by higher risk borrowers. Higher
interest payments often reflect the
greater risk of payments not
being met.
It’s important to remember that the value of the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.
More investors want to buy but fewer shareholders want to sell
BOND PRICE RISES
More shareholders want to sell
but fewer investors want to buy
BOND PRICE FALLS
Capital growth

You could, for instance, buy a bond for less than its original cost and make a profit by holding it until it matures.

The value of a bond might also rise during its life if:

Inflation Rises
Interest Rates Fall

The reverse is also true, of course.

Income
Regular payments to bondholders (in return for their loan) are specified when a bond is issued. These income payments are known as the coupon.
You know exactly how much you’ll receive as coupons are often fixed in value. Although so-called index-linked bonds pay coupons that will rise and fall in line with inflation.
However the government or company may miss their payments or default meaning the coupon isn’t issued.
WHAT ARE YOUR
INVESTMENT GOALS?
Investments in bonds can offer you a stable, regular income and, so long as the issuer doesn’t default, should help preserve the value of your savings. Bonds generally only offer limited potential for capital growth, however.
ARE THE RISKS OF
INVESTING ACCEPTABLE?
While bonds are generally lower risk investments than equities, your money is at risk. If a government or company defaults, perhaps because it can no longer afford to repay its debts, you will no longer receive any income payments and the bonds could be worthless.
ARE YOUR INVESTMENTS
DIVERSIFIED?
The percentage of your savings that you invest in bonds should reflect the level of risk that you’re willing to take. By having a diverse portfolio that also includes other types of investment, such as equities, property or cash savings, you could lower your overall risk while still benefiting from the potential returns that bonds can offer.
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Cash savings
Bonds
Equities
Property
IMPORTANT INFORMATION
To make the right income investment decisions you need to consider whether you want a more modest income that carries lower risk, or if you are looking for a higher income and willing to take more risk to your capital and income. It is also important to consider the risk and potential return of your capital.

We are unable to provide financial advice. If you are unsure about the suitability of your investment speak to a financial adviser. The value of the fund’s assets will go down as well as up. This will cause the value of your investment to fall as well as rise and you may get back less than you originally invested.