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Bonds

Bonds
The other main asset class is Bonds, either Government Bonds (Gilts) or Corporate Bonds issued by our leading companies.
Gilts
Conventional Gilts carry a fixed coupon and a known price at redemption (usually par, i.e. £100). The advantage of Gilts is that they can offer a more attractive rate of return than a Building Society deposit account but again the risks must be considered.
1) Security of capital - because Gilts are issued by the government they are the safest of all investments in that respect, as the default risk is negligible.top
2) Price fluctuation - the risk with Gilts lies in the price fluctuation. Although a bond may be issued at par (100) and redeemed at par (100) for a fixed period (say 10 years) the price can fluctuate in the meantime. Complete security of capital invested can only be guaranteed if the bond is held to maturity.
3) Tax treatment - the income received is taxed at source (25%) and higher rate taxpayers are required to make up the difference a...

Posted by: Carmen hershman

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