Are fixed rate bonds a wise option for your investment portfolio in 2012? With savings account rates scraping the bottom of the barrel, and an increasingly unpredictable stock market, fixed rate bonds can provide a happy medium for those seeking a little bit more for their money without the degree of risk associated with stock market investment - but are the fixed rates a problem?
When you purchase a fixed rate bond you receive a set rate of interest across a pre-agreed period of time in return for the loan of your capital. The fixed period is usually between 6 months and 5 years.
Your fixed interest rate is usually guaranteed unless the bond provider goes bust. The value of your capital is not normally guaranteed, so you may not get back the full amount of capital you put in.
Fixed rate bonds will often provide very competitive rates when compared to traditional savings accounts, so if you were to base your decision on current interest rates investing in fixed rate bonds can look like a very good option indeed.
What worries many is that when you take out a fixed rate bond you will usually have to make a commitment for a certain period of time. If interest rates begin to rise again before the bond term is over the investor could end up losing out on better rates until the bond term has expired.
The big question for those looking to find a good deal for their cash then, is when will rates start to rise again? Many economists predict that the Bank of England base rate, which has been stuck at 0.5% for some time now and plays a large role in determining interest rates across the market, will not shift until 2016. On the other hand some are predicting that the base rate will start to move again as early as 2013. The simple answer is that no-one can tell for sure.
At current rates fixed bonds offer a competitive option in comparison with many savings accounts, so holding a portion of your portfolio in such investment could prove to be a profitable choice.
The guaranteed income that fixed bonds can generate could be very valuable in times of few guarantees. However, in view of the fact that interest rates may begin to rise again in the near future you may want to consider spreading your savings across different savings and investment options which can include fixed rate bonds.
It's always a good idea to shop around and compare bonds and other options to secure the right deal for your needs.
If you do decide that investing in fixed rate bonds could be a suitable option for you, you may wish to speak to an independent investment advisor who can help you ensure that your portfolio is tailored to your attitude to risk and personal financial circumstances.
Searching for the best fixed bond rates can be a headache. A bond comparison website is one way to search for the best fixed rate bonds and may help you to secure a competitive interest rate for your savings.
No comments:
Post a Comment