Bonds (7)

Why invest in bonds?

Investors invest in bonds because

a) there is stability of income from the coupons,

b) the principal sum of the loan is preserved and

c) there are also opportunities for capital gains (due to the tradable nature of bonds).

Some investors view shares as generating higher returns but most acknowledge that bonds are less risky than shares.

Bonds also yield greater returns than savings and fixed deposits.

In other words, bonds present a good balance for those too cautious to invest heavily in the share market but wishing more returns than just keeping their money in the bank.