All You Need To Know About Fixed Income Bonds

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All You Need To Know About Fixed Income Bonds

What are Investment bonds?

Unless you are a seasoned investor, you may not know what investment bonds are and how they can earn you money compared to other types of investments. Firstly, we must define bonds: they are basically IOUs (informal documents that acknowledges a debt owed) emitted by companies and governments to make their capital increase. In this way, investors buy this debt and, in exchange, the company pays an interest–also known as a coupon, fixed income or fixed interest asset–at predetermined intervals (usually annually or bi-annually) and returns back the original investment amount on the expiration date, ending the loan.

The formula is simple: high yield is obtained by buying debt at discounted prices and selling it simultaneously to corporate clients according to pre determined criteria, a process known as arbitrage.

This regulated activity is an essential part of the Fixed Interest Market worth trillions of pounds each year. But into the investment bonds market, you can find two different kinds: secured and unsecured bonds.

What is the difference between secured bonds and unsecured bonds?

On one side, there are unsecured bonds–also known as debentures—with which the interest payments and return of principal are ensured only by the credibility of the issuing company. In the case that the company fails, the investor could get just a small portion of the investment back, which means that this is not the safest option for investors, because they may not get back all the money back they originally invested.

On the other side, secured bonds are those in which specific assets are committed to return the bonds if the company can’t take charge of paying the obligation. In Direct Property Investment, we only provide these kind of investment bonds; as we want to ensure that all investors that place their trust in us obtain the highest yield incomes without jeopardising their savings: it is important to point out that our funds are handled exclusively by an FCA regulated payment services provider.

Despite the bond investments market seeming to be rather complicated to manage, the truth is that it is under the same risk and incomes than the rest of the stock market.

The most important point is that investors know perfectly what to expect from this kind of investment. If the subject of investment bonds is still not clear to you and you have any questions, you can contact professionals to solve all your doubts and help you choose the best option according to your needs.