Gilt Bonds

By | October 2, 2013

Bank of England

If you are looking into different markets and you wanted a low risk bond for your portfolio then you might consider a bond from the United Kingdom. These are called gilt bonds and they are considered a low risk investment and this means that your money is safe in the bond but the coupon value that you would receive will be relatively low in comparison to some of the high risk but high coupon value bond.

Maturity

The date of maturity will solely depend on the situation on the treasury when they were issued as to the length of time to maturity. It is possible for the government to put long term dates of around 35 years on a gilt bond. There have been some undated bonds that are still in existence and some of these can have pay-outs four times a year instead of the usual twice yearly payment. It is possible to buy and sell gilt bonds and this means that you are able to buy some longer term options as well as shorter term options.

Interest

The interest that you will receive will depend on the gilt bond and the amount of the coupon value that was given to the bond at the point of creation. The current situation and the financial position of the country at that given time will help to denote the current interest rate that will be attached to the bond. Most gilt bonds pay out twice a year and the pay-out will reflect the face value of the bond and the coupon rate that it is given.

Value

Most of the value of the bond is placed at the date of maturity and the end payment is the face value of the bond when it matures. The advantage with having bonds in your portfolio is to get a steady coupon return twice a year which you can add to your investments or use for daily living. It will depend on the aim of your investment plan what you would need to do with the money that you have gained. It is your capital money growing and if you are serious about making your money work hard for you then you will need to have taken your interest payments into account when you are making your investment plans.

Purchase

You will be able to by gilt bonds from most banks, stock brokers and other financial institutes that you deal with. But, you must be aware that if you are overseas then you will need to consider the exchange rate and if this would wipe out the potential benefits from investing in the gilt bond market.

You can also get index-linked gilt bonds these will be linked to the inflation it is possible for inflation to go down as well as up. This will affect the amount of the dividend and the end value of the bond. This can give you more potential to make money but also it can mean that you might lose money too.

 

 

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