Gilts and bonds

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17. Conclusion

Financial markets will sometimes reward you for taking risk and sometimes punish you. The key is to know when it's worth taking the risks, and when it's not.

Bonds are not risk-free, but when stock markets are volatile and dividend warnings abound, they can be a good place to weather the storm.

• They give you a stable and predictable income.
• Your capital is as safe in gilts as it is possible to be.
• In corporate bonds, you have the option of higher yields at higher risk.
• If you predict the movement of interest rates correctly, you can make make tax-free capital gains.
• Liquidity is good.
• If you don't want to pick bonds yourself, you have the option of investing in bond funds.

Younger investors might be able to ride out the troughs and peaks of the stock market over decades, and may not find bonds a compelling case. Older investors, however, may need to concentrate on income and on capital preservation over the short term, and for them the case for bonds may be a powerful one.

You have now completed the course. To test your knowledge, take the Assessment test.

1. What are bonds? 2. Different types of issuer 3. Different types of bond 4. Bonds compared to shares 5. Bonds as tradeable instruments 6. Nominal yield 7. Calculation of current yield 8. Capital gains on gilts and bonds 9. Calculating the redemption yield 10. Factors which affect bond prices 11. Are bonds for you? 12. Selecting gilts and bonds 13. How to buy gilts and bonds 14. Unit trusts and bond funds 15. Keeping track of your bond investments 16. Tax 17. Conclusion

• First Steps in Bonds
• Beating the Dow with Bonds
• Pricing Convertible Bonds