A fully flexible way to invest
3 minute read
If you add up the total value of all the government and corporate bonds around the world, it will be significantly higher than the total value of the world’s shares. So, why is it then that not all investment portfolios include a bond fund? Maybe it’s because it can be difficult to decide which bond fund to buy? Maybe the solution is to buy a global bond tracker fund?
Who's it for? All investors
If you’ve never bought a bond fund, but understand the need to diversify your investment portfolio, the first question you ask yourself is, “what bond fund do I buy?” Just like there are funds that track whole share markets, there are tracker funds (also known as passive funds) which invest in the bond markets. Tracker funds offer investors the opportunity to invest in markets at a low cost, compared to active managers. And because tracker funds are designed to simply track the market, and thus deliver similar returns as the market they are tracking, they are ideal for first- time investors.
The Vanguard Global Bond Index Fund invests in bonds issued by governments and companies from around the world. Every bond the fund invests in, whether it’s issued by a government or a company, is of ‘investment grade’. The term ‘investment grade’ is used to describe bonds of the highest quality, which have a relatively low risk of defaulting, as defined by independent ratings agencies. However, like all investments, bonds come with risks and you could lose money.
In an attempt to reduce risk, the Vanguard Global Bond Index Fund invests in a lot of bonds. As at 31 May 2022, the fund was invested in over 13,000 different bonds. This level of diversification is typical of a bond fund, where the primary aim is to manage the risk of losing money if one or more of the individual bonds in the fund gets into difficulty.
Investors typically use bond funds to diversify their investment portfolio, because the bond market typically performs quite differently to shares. Another reason to invest in bonds is for a level of income. The underlying bonds pay a regular stream of interest, which is then paid out to investors of the fund. Whether it’s to deliver a stable level of income or a stable total return, investing in a tracker fund could be an attractive, and simple, way for you to gain exposure to bonds in your investment portfolio.
If passive funds appeal to you, you may wish to look at the tracker funds in the Barclays Funds List. We have selected 12 tracker funds which allow you to follow the performance of different investment sectors at a low cost. Find out more information on these funds.
The tracker funds on our Funds List are selected solely on cost – those featured are simply the cheapest available tracker fund we offer in each sector where a relevant product is available. The funds included in this selection are reviewed every six months, in June and December.
Correct at the time of publishing.
To diversify your investment, you may like to consider our own Barclays Ready-made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These Barclays multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified solution for investors. Ready-made Investments are not the only funds that we offer and they won’t be appropriate for everyone.
Past performance of the fund and its manager are not a reliable indicator of their future performance.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances. Smart Investor doesn’t offer personal financial advice. If you’re not sure about investing, seek independent advice.
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