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Bonds and Gilts

What are Bonds and Gilts?

Bonds and gilts are fixed income securities, issued by companies and governments as a way of raising money. They are bought by investors who lend their money to the issuer, so a bond or gilt is a loan for which the investor is the lender.

There are different types of bonds, click to read about the main types.

 

How do Bonds and Gilts work?

The issuer pays the investor for the privilege of using their money in the form of interest payments known as the coupon. The interest payments are made at a predetermined rate and schedule. The maturity date is when the issuer must pay back the loan (face value) to the investor.

Bonds and gilts are known as fixed income securities because investors know how much they will get back if they hold the security until maturity.

The main difference between bonds and any other loan is that bonds are tradeable and a bond's price changes daily. You do not have to hold the bond until maturity you can buy and sell at any time on the open market without needing to refer to the original issuer

Read about the Returns and Prices of Bonds 

 

How risky are Bonds and Gilts?

Bonds (gilts and other fixed interest securities) are marginally less volatile than equities and provide a more secure income return than cash. Bonds tend to complement well-diversified portfolios as another asset class next to equities. Read more about the Returns and Prices of Bonds.

Bonds serve as a conservative investment because they typically provide a secure income and capital return but bond prices can go up and down. The main determinant of bond prices is interest rate change. Read more about price volatility.

 

Which account should I choose to invest in Bonds and Gilts?

You can invest in fixed interest bonds and gilts through our Trading AccountTrading ISA or SIPP.

 

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Risks

  • The value of your investments can go down as well as up. You may not get back all the money that you invest.

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