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Deciding The Best Bond For Long term ROI

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Investor series slides & content extract: from the investment mastermind event on 21st October 2018

Bonds have been a mainstay of investors for many years, offering a way to broaden your portfolio. If you’re looking to invest your money in bonds, here are three options rated against risk and reward:

1. Government bonds
Government bonds are among the safest investment available. The government issues bonds to borrow money so they can meet their liabilities. Investors invest in a bond to earn a return paid by the government. The yield on a government bond increases depending on the length of maturity and demand. A stronger economy usually sees the demand for government bonds decrease because investors are more willing to take bigger risks on high yielding investments. In a period of instability in the markets or a downturn, investors may come back to government bonds as these are less risky compared with corporate bonds. The downside, of course, is the return on these types of bonds is very low.
Risk: Low
Reward: Low

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2. Mini-bonds
Mini commercial bonds have become more common in recent years as corporations look to ways to seek alternative finance from the market, away from banks and even some of the existing peer to peer lenders. Mini-bonds effectively give control to companies to raise finance from investors in return for offering a higher return, against low interest savings accounts, for example. These bonds will pay out a medium to high yield during the term of the bond, but this is necessary because of the significant risks involved for investors. The effectiveness of the bond is tied to the creditworthiness of the business and should anything happen to the company, such as it folding, bond investors go to the back of the queue like any creditor. This makes mini-bonds high risk, although the returns may be favourable against other investments.
Risk: High
Reward: Medium/High

3. De-risked Property bonds
Property bonds are another way for investors to gain the benefits of investing in the resilient UK property market, without having to deal with the complexities of purchasing, developing or renting property.

While property is generally a safe investment, the problem with many property bonds has been risk. Property can be a solid investment but bonds tied to construction firms have risks involved from delays through to going bust because of factors outside their control. For this reason, many investors have sought to steer clear and see these as high risk investments for not enough return. However, a new breed of property bond solves this issue – the de-risked property bond.

The caveat is that only certain property bonds offer the security needed to make this a safe investment. Look for property bonds tied to specific developments and those which offer security in the form of assets. This places a charge on the property so bond investors have a higher claim as creditors should anything adverse happen, such as the company collapsing.
Risk: Low
Reward: Medium/High

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If you are looking to expand your UK property portfolio or want to buy into the strength of the UK market as part of a high yielding property bond, Certa Invest has options available with up to 8% fixed return every six months on an investment as low as £50,000. Call our team right now before this opportunity expires.

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