The investment building blocks

As we identified in the last chapter, equities and fixed income are the key asset classes used in most personal investment portfolios. In this chapter we’ll take a more detailed look at these two asset classes so you can gain a better understanding of the risks and rewards and how you might deploy your capital.

Fixed interest investments

Fixed income (which from here on we’ll refer to as ‘bonds’) are loans by investors to governments and companies that will be repaid at a pre-agreed date in the future (although a small number of bonds are undated). In return for lending their capital, bondholders are paid a fixed amount of interest, referred to as the ‘coupon’. Corporate bonds (those issued by companies) ...

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