A Beginners Guide to Bond Investment

Fed up with earning a pittance from your bank? A subscription for a Bond may be just what you need to get your money working a bit harder for you.

Having a new litigation funding bond means that you are more likely to receive a higher rate of return on your money than from your day to day bank account.

Contrary to popular belief, you don’t have to have a lot of money to start investing. Really, all you need is to be able to lock a small sum away for a while and be clued up with the right knowledge to make sure that you are making a profit for your Bond.

Of course, there is always a risk like with all investments but the competitive annual returns can far outweigh the risks. You can even benefit from fixed term bonds which offer a static interest rate. If you’re not sure on what information is more important to keep an eye on, you could always look into it via companies like SoFi and maybe even use them as a platform to get on to the investment ladder. This will help you assess what risks you may need to take to get a good return.

What is a Bond Investment?

A bond or fixed interest securities are loans you can send to an individual company or the government. Simply, you are lending money to a company in exchange for interest payments. Your Bonds will pay you a fixed rate of interest which never changes over the Bonds life.

You can invest as much as you like depending on the company but the minimum is normally £2000.

It’s always recommended that you find professional advice before making any sort of investment. A professional service like Just ISA can talk you through their offering and help you to assess your current situation while determining the risk involved.

Your returns

The returns on your Bond investments will be at the set rate of interest per annum. Interest is calculated and paid to you on your agreed Redemption Date. This is when any fees will be taken out.

Risks involved

Every investment carries a sort of risk. With Bonds, because they pay a fixed rate of interest, your money stays invested for the whole of the agreed term.

As Bonds are secured investments, they aren’t protected by the Financial Services Compensation Scheme. This means that if the company you have a Bond with goes under you may lose all or part of your investment. It is always worth reading the FSCS website first to check what if anything they could do if the worst happened.

Most financial experts will recommend you put you invest your money over a range of different investments so that your risk is spread out. This reduces the chance of you losing a lot of money in one go on one bad decision.

As a beginner, it’s best to seek out financial help. Decide how much you are willing to invest, what’s the maximum risk you can take and how comfortable are you living on the edge. All investments come with risk but like everything; the bigger the risk the bigger the reward will be.

When is the right time to invest?

That’s completely up to you and depending on your financial situation. Once you believe you are financially stable enough to start investing may be the right time to start looking for professional advice.

You should never use any of your emergency savings to back an investment and always pay off all debts first.

Then start to decide what you want your financial goal to be and really know why you want to invest right now. Is it to buy a new house and boost your deposit? Is it to make sure that your kids have money in the future? Is it for retirement?

Make sure you understand ALL the risk and decide now on your level of risk.

The most important thing? Only invest what you can afford to lose.

Laura x

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This is a collaborative post.