CHAPTER 6

THE INVESTMENT BUILDING BLOCKS

‘The only thing we know for certain about investing is that diversification is your buddy.’

Merton Miller

As we identified in the last chapter, fixed income and equities 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 that you can gain a better understanding of the risks and rewards and how you might deploy your capital.

Fixed interest investments

Fixed interest investments (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 ...

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