Bonds Explained

Bonds are essentially loans to a company and are a relatively simple investment vehicle to get your head around and start using to your advantage. It tends to be that the higher the rate the bond / company pays the higher the risk, which is why we tend to only promote bonds where there is the additional comfort of asset backing of some description.

What is a bond?
A bond is also referred to as fixed income security and sometimes a Debenture
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A bond is essentially a loan given to a business or the government. As the investor, you are the creditor, loaning your money for a defined period of time for an interest rate.

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Interest rates can be both variable where they fluctuate reflecting market conditions or fixed, giving you certainty.

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Bonds are issued when companies or other organisations need to raise additional capital, this can be for a variety of reasons, for instance, to refinance existing debts or to fund a new project.

Earning money from a bond

During the bond term from a bond from one of our Corporate Clients you can expect to receive regular interest payments. When the maturity date is reached, the loaned funds (the bond) are returned. If you were to purchase a bond for say £10,000 with a 15% interest rate, you would receive £1,500 annually over the bond term. Typically sold in small denominations, such as £5,000 or £10,000, bonds give you the flexibility to invest as much or as little as you want in a venture. 

When compared to traditional bond markets, our Corporate Clients bonds tend to offer less volatility in pricing as there is usually no central market for trading these bonds. Bonds are usually bought by investing directly with the Company via an Investment Invitation, and the bonds are not normally designed to be traded on any secondary market. Anyone can invest in bonds, choosing either individual bonds such as the bonds from our corporate clients or perhaps a government bond or a mutual fund bond to match your risk profile and needs.

Your bond investment

£10,000

Your interest rate

15%

per annum

You receive

£1,500

annually over bond term

Why invest in a bond?
There’s been a growing interest and demand for traditional bonds in the UK in 2017 – in part, this could be due to the political and economic uncertainty the country is facing but, there’s also a case to be made for the potential returns a bond has to offer over typical savings accounts. The latest figures (2017) show that £4.9 billion has been placed in fixed-income funds in the three months to October 1 2017, totalling £9 billion over the 12 months to October. Of the different asset classes, bonds were the bestselling throughout the third quarter 2017, with a particular focus on the strategic bond sector (www.theinvestmentassociation.org).
The strong trade of bonds indicates that even as interest rates are poised to rise further in coming quarters, bonds still offer an attractive investment proposition to those keen to maximise their savings, diversify their portfolio and offset risk. The evidence is that there is large scale divesting of traditional bonds at this time…
There are multiple reasons to choose to place your funds in the bond market
HIGHER INTEREST RATES

Bonds are essentially loans to a company and are a relatively simple investment vehicle to get your head around and start using to your advantage. It tends to be that the higher the rate the bond / company pays the higher the risk, which is why we tend to only promote bonds where there is the additional comfort of asset backing of some description.

DIVERSIFY YOUR PORTFOLIO
If you’re already holding stocks or other investments, our corporate clients bonds can help you diversify the higher risk end your portfolio. By investing in a number of our corporate clients bonds you will be spreading the risks, and you’ll benefit from having a portfolio of our corporate clients bonds at a time of volatility and political uncertainty.
LESS ASSOCIATED RISK

Bonds are often chosen for being a stable, reliable income. There’s a growing scepticism towards the bull stock markets and, as a defensive asset, bonds are an ideal option for those seeking a predictable form of income.