WiseAlpha’s educational digest: Teaching you how bonds have come to be, and how they end up on the investment platform.
Bonds are often less well understood by the average everyday investor. Why is that? Bonds are not as widely available to everyday investors and as a consequence, there’s less press/media coverage of bonds compared to other asset classes like equities. As it turns out, bonds are much simpler than investing in shares and can be a less risky. And, are a more predictable way to make a return.
Bonds are a form of borrowing and investing in a bond is a form of lending. If a company or government issues a bond, and you invest in it, you are now a lender to the bond issuer. The bond issuer is legally obliged to pay you a coupon (interest) regularly and repay the entire amount that was borrowed at the outset by a certain date (called maturity date). This creates a strong level of certainty for investors both in terms of the return they will make and from the expectation of receiving their capital back at maturity. If we compare this to investing in shares, shares provide no contractual certainty of dividends and no expectation of capital repayment but instead the hope of a capital gain from a rise in the share price.
As with all investments your capital is at risk. WiseAlpha members purchase Notes which are fractions of individual corporate bonds.
See full Risk Statement at www.wisealpha.com