Cash and bonds

Whether you view your money as nothing more than the means to an end or the ultimate security blanket, one thing's for sure, you need to look after it.

The value of investments can fall as well as rise. You may get back less than you invest.

Cash is a low-risk investment. A bank repays it on demand in most cases and even pays you interest.

When you invest in a bond, you effectively lend money to the provider. Your money is at risk because there's a chance that the issuer won't be able to make repayments. Bonds tend to pay a fixed interest rate although some returns are linked to a benchmark such as an index.

The returns are potentially higher but you'll need to deposit your money over a longer period. And, if you sell a bond before it matures, you might get back less than you paid for it. If the bond issuer can't repay you, you can lose all of your capital.

Introduction to investment bonds and gilts

On the investment risk scale, bonds – sometimes referred to as fixed income investments – typically sit between cash and shares. Bonds however, come in a variety of guises. We look at what you need to know.

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