Reading the Financial Pages for Dummies®

Chapter 6. Investing in Bonds

In This Chapter

• Introducing bonds

• Taking the safest entry route with government bonds

• Moving out a little with corporate bonds

• Considering the high-risk alternative of junk bonds

When it comes to making money, nothing will keep you glued to your seat more firmly than the stock market. The thrill of taking risks, the satisfaction of getting it right – and even, sometimes, the learning experience of getting it wrong – is all very absorbing stuff, no doubt about it. And in the long term, as every available study on the subject will confirm, a policy of backing shares over cash or other investments will bring better results every time.

But there's another way to run a portfolio. The credit crunch of 2007 and 2008 did much more than just concentrate peoples' minds on the fallibility and the vanity of the equity markets, which crashed by 45 per cent and sometimes more during the ensuing panic. It also focused our minds on the importance of making room for safe, steady earners that have the ability to keep us provided for, no matter what might happen in the future.

That's when bonds come into their own. When you buy a bond, you're putting your money into something that you know won't ever go bust, no matter how bad things might get. Providing you can buy your bonds at the right price, they should normally provide you with a decent income for life – with the added possibility of being able to make a capital gain when you eventually sell them. Bonds are great for people ...