Generally, bonds are regarded as 'safer' than shares. This is true in a very general sense, since their prices tend to gyrate less dramatically than those of shares. But different kinds of bonds offer different levels of safety. There are also circumstances where bonds can be very risky indeed.
A bond is basically an IOU - a promise to pay back your original investment (your 'principal') at a later date, plus interest payments (the 'yield' or 'coupon') at regular intervals between now and then. Like all IOUs, how reliable it is depends on the borrower. There are broadly three types of borrowers:
These can be relied on to honour their obligations to bondholders. The UK government has never defaulted, i.e. failed to pay interest or principal, on its bonds. These are known as gilts, from the old days when gilt-edged certificates were issued. Your pension fund has to buy these to guarantee they will be able to pay you an annuity when you retire.
They are 'safe' so long as inflation remains low. But when it is high, your interest payments will be worth less in real terms. Your principal will also lose much of its value. If you are worried about inflation, one way to protect yourself may be to buy index-linked gilts. Another is to stick to shares!
These are always regarded as more risky than gilts, because companies sometimes default. But obviously, the stronger they are financially, the less likely this is. Certain agencies give ratings to bonds, so you can tell how risky the market thinks they are. AAA is the safest category. Anything in the B category or below would be too risky for the average investor.
Company bonds tend to rise in value when business is picking up, and inflation and interest rates are falling. But since shares tend to do even better in these conditions, you will usually be better off in them. The main exception to this rule is when you are shifting the emphasis in your portfolio from growth to income. If so, you may consider diversifying by buying a bond fund rather than individual company bonds.
These have proved to be very unreliable in the past. For example, Russia, Mexico and Brazil are all previous defaulters. Investing in this type of bond is strictly for veterans.
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