Search
Bond markets often play second fiddle to stock markets and despite them being much bigger, bonds don’t get talked about as much in the press, They’re not hot topics at dinner parties, and conversations between friends on the next ‘hot bond’ are probably rare.
The reason for this?… Bonds have a stereotype of being boring.
They’re issued, they pay some income, then they mature and give investors their money back. They’re not supposed to be much more exciting than that.
Bonds are one of the most traded types of investment and with stubborn inflation and the highest interest rates for 15 years, bonds are beginning to re-emerge into the spotlight.
What are bonds?
A bond is a fixed-income investment where investors lend money to governments or companies for a set period, in return for regular interest payments.
In return for the loan, the borrower will agree to pay the lender regular interest payments – these are usually paid, quarterly, bi-annually or annually and are known as coupon payments.
At the point of maturity, which is when the bond ends, the original investment loan is paid back to the lender. Most bonds are issued with long-term borrowing in mind, this can be anything from 12 months to 50 years.
What’s a yield?
This is the rate that the bond issuer will be paying to the investor as interest in return for borrowing money from them.
A yield measures the income from an investment over a set timeframe, compared to the price or investment made. It can guide the investor to know what their interest or coupon payments will look like.
Bonds in Practice
Unlike shares, you own debt in a company rather than a slice of the company. You won’t get a say in how the company is managed as you won’t have voting rights. In return, you receive regular payments as interest on your ‘loan’ and at the end of this loan, the maturity date, you receive the amount you invested back in full.
ABOUT ORB INVEST
Orb Invest work alongside their clients’ established portfolios, providing them with the opportunity to explore products within the Alternative Investment market, with hands off and fixed income offerings.
We aim to provide double digit returns on an annual basis, working towards growing our client’s wealth, by delivering income or growth returns.
We would be delighted to arrange a call or meeting to explore how we can assist you in diversifying your portfolio.
Leave A Comment