Bonds

Pobby

I have heard people talk about buying bonds as a safe place to put money.Please could someone tell me a little more about it?

Robert_Sterling

How much money are we talking about here?

dunstonh

bonds cover a wide range of products and terms. Some are marketing terms that arent really bonds at all and then you have real bonds.

What type of bonds are you thinking of?

Robert_Sterling

Could you expand on what bonds are real bonds and what bonds are not real bonds?

cheerfulcat

Robert_Sterling wrote:

Could you expand on what bonds are real bonds and what bonds are not real bonds?

Real bonds are loans, either to a government ( gilts ) or to a company. Generally speaking, buyers of bonds are buying the loan, not lending the money. The not-real " bonds " are various kinds of financial products and plain old fixed term deposit accounts, called bonds by the providers as a marketing ploy.

Pobby wrote:

I have heard people talk about buying bonds as a safe place to put money.Please could someone tell me a little more about it?

There is a useful short ( free ) course at Incademy. Briefly, bonds are as safe as the issuer is reliable, so UK and US government bonds are very safe, because they have never defaulted, whereas some of the dodgier governments have had to have debts written off ( so no money for the bondholder ). Company bonds come higher on the risk scale than solid government bonds but lower than flaky ones. Again, the bonds of companies which are more likely to default are riskier ( used to be called " junk " bonds ).

Riskier borrowers have to pay more in interest so as a general rule the rates for the lender should be better on the dodgy bonds but in recent years the demand for bonds of all flavours has been such that there is practically no risk premium anymore. Consequently they are nowhere near as safe as they used to be ( IMHO ) and cash ( again IMHO ) looks more attractive right now.

Bonds are usually best bought in collective funds; it is a very specialised field.

Pobby

Thanks so far.I guess I would consider investing at least £50k.

EdInvestor

.. the rates for the lender should be better on the dodgy bonds but in recent years the demand for bonds of all flavours has been such that there is practically no risk premium anymore. Consequently they are nowhere near as safe as they used to be ( IMHO ) and cash ( again IMHO ) looks more attractive right now.

Quite agree. People looking for income investments with a similar risk level to bonds could consider commercial property funds which invest in buildings (eg shopping malls and office blocks).Combined with cash they are a better bet IMHO.