If you’re looking for a low-risk way to save money, a bond could be a good choice for you. However, there are a few pros and cons you should think about before you invest:
Investing in bonds
- Bonds are very low risk, so if you have some money in higher risk investments like stocks and shares, they can be a good way to balance out your finances.
- Bonds have a fixed, guaranteed rate for the term of the bond. That means you know exactly what you’re going to get back at the end.
- If interest rates go up, you won’t be able to benefit as your interest rate is fixed. Easy access accounts may rise with the Bank of England base rate (however, they may also fall!).
- You won’t be able to access your money until the term of the bond is up. The longer the term of your bond, the more likely it would be that rates would rise, and you won’t be able to take your money out and put it somewhere else with a higher rate.
- Any money up to £85,000 saved in a UK-regulated bank or building society is protected by the Financial Services Compensation Scheme (FSCS) – this covers bonds as well.