Anyone use Fixed Rate Bonds?

Hi all

I have all cash right now, I have realised investing is not for me, well not for now.

I have been looking and realise my best cash savings option is to invest in some bonds as I am quite sure I won't be needing the money for anything. I'm wondering if anyone else invests in bonds? The best 1 year rate i can see is 2%. it doesn't beat inflation, but it is better than nothing.

Thanks
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  • Albermarle
    Albermarle Posts: 21,635
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    Be careful, that from other threads , there are some fixed rate bonds around , paying maybe 0.5% above normal that are not normal savings accounts. They are some kind of actual bonds rather than a deposit account .
  • masonic
    masonic Posts: 23,068
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    Albermarle wrote: »
    Be careful, that from other threads , there are some fixed rate bonds around , paying maybe 0.5% above normal that are not normal savings accounts. They are some kind of actual bonds rather than a deposit account .
    They are usually at least a few percent above the best available fixed rate savings account, but always read the risk warnings and preferably stick to the major savings comparison sites.
  • MovingForwards
    MovingForwards Posts: 16,861
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    I've had bonds with virgin for a couple of years now, just put the money in and wait for it to gather interest. They give you an example of the amount you would get back at the end of the term so you can see what you will get, just need to multiply it by however many thousands you are putting in.
    Mortgage started 2020, aiming to clear it in 2026.
  • jimjames
    jimjames Posts: 17,532
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    Hi all

    I have all cash right now, I have realised investing is not for me, well not for now.

    I have been looking and realise my best cash savings option is to invest in some bonds as I am quite sure I won't be needing the money for anything. I'm wondering if anyone else invests in bonds? The best 1 year rate i can see is 2%. it doesn't beat inflation, but it is better than nothing.

    Thanks

    Remember you don't need to do all or nothing. You can have a mix of assets, in fact it's highly advisable to do so.

    So if you're worried about the risk of investing then having a low proportion of your money invested could be an option.

    Say for example you have £100k and would feel very worried if your money was to drop more than 10%. You could have £20k invested and £80k in cash. If there was to be a crash and the £20k invested could drop to say £10k for a while, you'd still be at £90k and have only a small risk to your overall capital. If you had it all invested then it would be possible to have dropped to £50k so 50% drop.

    You might not be comfortable with any risk to the capital but that's a false decision because you're facing inflation risk instead. If income is your main requirement then you'd be getting around 4% from the FTSE at the moment (not a suggestion to use that but an indication of the income possible)
    Remember the saying: if it looks too good to be true it almost certainly is.
  • Prism
    Prism Posts: 3,794
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    The bar for easy access accounts is currently set at 1.5%, so bonds/fixed term accounts over 1, 2 or 3 years need to earn somewhere between 2 - 2.5% to be worthwhile imo. With possibly rising interest rates I would be wary about locking in for anything longer as the short term deals should in theory get better.

    I am currently using 1 year fixed interest accounts in my limited company for holding cash for future salary, dividend and tax payments but not using bonds or fixed savings at all as an individual.
  • george4064
    george4064 Posts: 2,802
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    You really should trawl through this webpage and decide whats best for your circumstances: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/?_ga=2.256992712.212165065.1540150082-901705484.1520349272
    "If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes” Warren Buffett

    Save £12k in 2021 - #027 £15,268 (76%)
  • triplea35
    triplea35 Posts: 339
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    edited 22 October 2018 at 4:36AM
    We still feel the need to use our ISA allowances each year. Also being shy of further investing at the moment we are putting them in fixed rate bonds.
    It is annoying though that a one year fixed rate bond in a Cash ISA is around .5% less than in normal accounts.
    Thats around 25% less interest, £200 on our joint allowances.
  • Bacman
    Bacman Posts: 537
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    5 year fixed rate bonds are best rates, assuming of course you have no intentions to need the money during the 5 year term, otherwise you'll lose all interest you gain.


    ISA's are not high enough any more to beat 5 yr fixed rate bonds even if you pay tax at 25% however might be a different story if you pay high rate tax.


    Best rates with fixed rate bonds, with reputable firms, is around the 2.66% mark which isn't great but isn't bad. Ensure you invest no more than £85,000 per person named on the account with a financial company (FSCS insured), including any subsideries they own too; otherwise you'll not be covered fully by FSCS if they go out of business.


    Don't go for any risk businesses like peer-to-peer or "anticipated interest rate" or foreign banks that don't have branches in the UK and fully FSCS approved.


    Also, bear in mind if you take a shorter length fixed rate investment that pays less then you are gambling that after it matures you can get a much higher rate in order to compensate for the difference you'd have got by a longer fixed rate plan - for example, if you get 2.5% on a 5 year plan, but go for 1.5% on a 2 year plan then after that you are gambling that the interest rate for the next 3 years with a company will be at least 3.2% for the next 3 years otherwise you'd be out of pocket!


    In other words, safely invest, intelligently invest, do your research and also don't be greedy!
  • Malthusian
    Malthusian Posts: 10,898
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    masonic wrote: »
    They are usually at least a few percent above the best available fixed rate savings account, but always read the risk warnings and preferably stick to the major savings comparison sites.

    Albermarle may be thinking of Castle Trust, which only pays about half a percent per annum more than the best-buy FSCS-protected bond. Which investors could misinterpret as meaning it is also an FSCS-protected bond. And occasionally its ads pop up when you search for terms like "fixed rate bonds". It is in fact an ultra-high-risk corporate bond that could lose all your money. Or at least it did a year or so ago. Needless to say the OP should go nowhere near.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    edited 22 October 2018 at 8:59AM
    I use fixed rate bonds for cash holdings. Deposit minimal amounts into each bond then I've constantly a bond maturing. Might as well make use of the tax free savings allowance.

    Manage your money sensibly. Inflation shouldn't be an issue. There's many items in the CPI basket that I don't consume, have any need of. Inflation is really a personal matter.
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