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Risk Warning The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance.
When buying gilts and/or bonds, you should consider the issuer's credit rating and their ability to repay their debt. This will have a direct bearing on the value of the investment. Should the issuer default, they may not make interest payments or be able to repay your money.
Fixed interest securities for generating income
Your Selftrade account enables you to trade in UK Government securities (Gilts) and a wide range of corporate bonds.
Often favoured by investors looking for income, or protection against inflation, they are priced in pounds and traded in 'blocks' of £100 nominal value. Gilts and Bonds are generally viewed as being of lower risk than shares or funds, although their prices can also fall as well as rise and investors should consider the credit worthiness of the issuer before trading.
Our comprehensive Fixed Income Investor microsite will help you learn more about Bonds, show you what's available and provide you with news and commentary to keep you up-to-date.
Gilts or Gilt-Edged securities to give them their full title, are issued by the UK government to fund its expenditure – effectively you are lending them your money.
Because no UK government has ever defaulted on repaying these loans on time, they are considered to be safer investments, although of course past performance is not a guide to future performance.
In exchange for lending them your money, you get interest – either at a fixed rate or linked to inflation depending on the particular gilt you buy. And in some cases you can be sure of capital growth too, for some gilts can be bought for less than their final par value.
Bonds are issued by local authorities and companies as a way of raising finance. Like Gilts, they are repaid at a future date and carry a rate of interest that is either fixed or index-linked to inflation.
Bonds are often used for income generation and are a core portfolio constituent. Because of the fixed interest nature of these products, their price reflects the outlook for interest rates and inflation. As well as buying individual Bonds, you can invest in them through actively-managed Funds or passive Bond ETFs, which aim to mirror the performance of bond indices.