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The Financial Times Guide to Investing, 3rd Edition by Glen Arnold

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6

Bonds

Bonds can be good investments for private investors to hold. They offer a higher income than a building society deposit account, with the possibility of some capital growth. They generally offer lower risk than shares, but offsetting this is the fact that they offer a lower return.

A bond is a long-term contract in which the bondholder lends money to a company, government or some other organisation. In return, typically, the company or government promises to pay predetermined regular interest and a capital sum at the end of the bond’s life. Basically, bonds may be regarded as merely IOUs with pages of legal clauses expressing the promises made. They are the most significant financial instruments in the world today, with tens of trillions ...

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