Saving Bonds? To invest or not to invest

Leodogger

I am thinking of taking out a savings bond for at least 1 yr.   Is there any risk to bonds?   Is there any difference between those and fixed rate savings accounts or are they one and the same?  Which are the best?

dunstonh

Is there any risk to bonds?

Fixed term deposits are deposits. So, get the same deposit protection as instant access deposits.

The risk is no access to your money with most FTDs.

 Is there any difference between those and fixed rate savings accounts or are they one and the same?

The word "bond" is one of the most misused in financial services.   Bond could apply to FTDs (the context you are looking at) but also through lower risk based investments through to damned high risk.  There are also two tax wrappers that have bond in their name (onshore investment bond and offshore investment bond).

Albermarle

It would be better if savings providers did not use the word 'bond' and just said Fixed rate account.
Bond is also favoured as a description by scammers of their 'offerings' 

InvesterJones

I'm guessing bond just means 'promise' really - ie it's a promise of future payment in return for you lending or depositing your money with someone. When they're companies or governments you're lending to they're what you'd typically call a bond (or gilt in the UK government's case, from the physical certificate you used to get), but fixed rate accounts are in effect the same thing, only you can't subsequently trade the IOU itself like you can with bonds.

In terms of risks, the main one is risk of the promise being broken. For savings accounts we get protection against this. For bonds less, so, so bonds get a credit rating instead which can be used to assess the likelihood of the promise being kept. Developed world governments which can effectively print money to pay what they owe on bonds are highest rated, albeit you never know if the US might default just for political reasons or if the UK finances really make sense for e.g. while startup companies or emerging markets tend to have lower credit ratings (and therefore investors ask for a higher return to compensate).

If looking to trade on the value of bonds themselves (vs their yields) then the value is very much dependent on movements in interest rates - as seen in 2022 for example.