Bonds may be your best investment

You may choose bonds as your primary investment, or combine with other methods to maximise rewards.

08:39 07 October 2013

The world of investments is a complex one and it can be difficult to even find out all the available options, let alone which option is the best for your particular finances.

We may automatically think of the stock market or business start-ups when we hear the word “investment”, but bonds can be a form of investment as well. Stock market-linked bonds present an option in which you have a modicum of control over the risk level.

Here are a few things to keep in mind regarding stock market-linked bonds:

• There is usually a fixed amount of time for the duration of your bond, such as keeping the bond for one to five years.

 

• Money is typically handled by a broker who can work with you to obtain the type of return you would like to see in the future.  There are no guarantees, but the brokers will be able to make wise decisions based on your risk preferences.

 

• Even with a broker it is possible to lose money because the stock market can ebb and flow; this is the reason a longer term bond may be more successful.

 

• You may have the option to receive monthly income and then a reduced payout at the end of the bond term, or you can wait and receive the full amount all at once at the end of the bond term.

Before you can make any decisions about the type of bond you want and the amount you want to invest, you will need to figure out what level of financial risk you are willing to take. Stock market-linked bonds are not really guaranteed to succeed, but they do have a track record. You can do a little research to find out which banks and companies have been more successful to try and minimise your financial risk.