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Types of bond investment

Bonds investments can include:

Corporate bonds

Corporate bonds are issued by companies as a way of raising money to invest in their business. They have nominal value (usually £100), which is the amount that will be returned to the investor on a stated future date (the redemption date). They also pay a stated interest rate each year - usually fixed. Corporate bonds are bought and sold on the stock market and their price can go up or down.

Gilts (government bonds)

Gilts (or gilt-edged stocks) are bonds issued by the government which pay a fixed rate of interest twice a year. They are considered safe investments as the government is unlikely to go bust or to default on the interest payments.

However, you are not guaranteed to get all your capital back under all circumstances. Gilts, like corporate bonds, are bought and sold on the stock market where their price can go up or down.

Gilts can be bought and sold through brokers, high street banks or through the government's Debt Management Office (DMO) which produces a guide to buying gilts.

Bond funds

Bond funds invest in several bonds (including corporate and government bonds) with different interest rates and different maturity dates. This reduces the risk to your capital. But because of the mix of investments, bond funds can't promise a fixed return; instead they aim for a 'target return'.

For more information about bonds visit the Money Advice Service website.

• More about bonds - Money Advice Service Opens new window

• Read more about buying and selling gilts on the DMO website Opens new window

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• Getting help buying investments Opens new window

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