When thinking about investing in bonds, you may consider the safety and security that comes with pledging your funds into them. Investors around the world are looking at ways to optimize and diversify their portfolio, by investing in different areas. Bonds should be considered as an attractive investment option for optimising investments during a pandemic – and here’s why.
Bonds can provide a constant income
Traditionally, it has been said that stocks grow your wealth and bonds grow your income. This view changed with the introduction of short-term bonds and in more recent times when the UK sold its first negative yield bond in 2020.
Although this might be a reason to avoid government bonds, there are plenty of bonds available that offer a reliable income each year. For example, high yield bonds can provide positive yields that can grow your investment account and hedge against stock volatility.
Earn tax-free income
ISAs were established with tax incentives to encourage savings. ISAs enable the investor to hold securities including government and corporate bonds, without having to pay tax on capital gains.
It is more important than ever to diversify
The current pandemic continues to demonstrate the crucial importance of diversifying your investment portfolio. The best example to offer is the alarming rate in which the stock market dipped at the beginning of the Coronavirus outbreak. It is simply too risky to have all of your investments in one area; a wider spread offers an increased security measure.
The Pandemic Has Strengthened Bonds Backed by the UK Housing Market
Astute Capital offers a fixed-rate bond that is backed by UK property. Much like the majority of markets, the bond market has been affected by the Coronavirus pandemic, our bond remains resilient. This is because the housing market saw a boom due to COVID-19 lockdowns and other restrictions.
Global Markets Are Experiencing Unprecedented Volatility
While global stocks experienced significant gains and deep corrections last year, it became obvious that a long-term strategy was necessary for investing success. Many investors experienced major fluctuations in investment values from one day to the next.
Is Now the Time to Consider Bonds?
With historically low-interest rates and the potential for negative interest rates in the future, now is the time to consider your priorities as an investor. Fortunately, there are many bond options that can provide fixed rates so that you receive a set return year after year.
One of the most exciting options that you can invest in today are bonds secured by loans on the UK property market. Bonds are more attractive because they offer a better return than banks and less volatility than stocks and shares. There is an allowance for investors to mitigate their risk, whilst securing revenue.
Investors can also take advantage of the wrapping up their investments and make the most of the tax-free benefits that come with bond acquisition.
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