About Guaranteed Bonds
Guaranteed bonds are increasing in popularity following the recent misfortunes of many investors during 2007 and the years following.
The impacts of the recession on funds investments were compelling. By 2009, over 11% of investment funds were classified as ‘dog funds’, at the bottom of the market measured by performance. These poorest performers included some of the largest funds on the market, and, as more large UK funds fell into the underperformers category, more investors found themselves caught out.
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No risk to capital in Guaranteed Bonds
Guaranteed bonds guarantee to the investor that he is investing with no risk to capital. This is because the guaranteed bond undertakes to return the amount invested, as a minimum, so that you cannot lose the money you put in. If you invest, say, £10,000 in a guaranteed bond, then £10,000 is the absolute minimum you will get back.
On the positive side, you also stand to receive a return on your capital, if there is growth in the investment while your money is locked in. It is the guaranteed minimum return of capital invested, plus the possibility of growth, that makes guaranteed bonds an attractive investement, particularly for the cautious investor seeking to avoid risk.
It must be borne in mind that, if the bond does not perform well and only the original investment is repaid, the real value of that investment may have been depleted by inflation over the lifetime of the bond, and consequently the real ‘buying power’ of the capital will have reduced.
There are certain conditions attached to investing in guaranteed bonds. First, you must lock your capital away in the bond for an agreed length of time. This is known as the ‘term’ of the bond, and might typically be between 5 and 10 years, depending on the bond you choose.
Extra charges are often payable in return for the peace of mind that comes with an investment guarantee. Guaranteed bonds are often offered as guaranteed versions of a standard, non-guaranteed bond, with the extra charge applied to pay for an insurance premium which underpins the capital guarantee.
Guaranteed Bond from MetLife
One such guaranteed bond on offer from Principle First is the MetLife Guaranteed Investment Bond. This is a guaranteed bond based on the MetLife Investment Bond.
The bond has an 8-year term, and is therefore suitable for those who are prepared to leave their money locked in the bond for a period of 8 years. The minimum investment in the MetLife Guaranteed Investment Bond is £10,000. This bond comes with an attractive option of reinvesting growth, up to 10% in a year, back into the bond. This increases the amount guaranteed in the bond, in other words, there is an increase in the minimum amount that will be paid back by the bond at the end of the 8-year term.
Guaranteed Equity Bonds
Guaranteed equity bonds offer the cautious investor the opportunity to take a punt on the UK stock market, while enjoying a ‘no risk to capital’ guarantee. Guaranteed equity bonds offer a return of capital invested, plus a percentage of any growth in the FTSE 100 share index, to those prepared to lock their money away for a fixed period, which is usually 5 years. Again, while investors in guaranteed equity bonds enjoy no risk to their capital amount, it may have been depleted by inflation if the FTSE underperforms and only the original capital is returned.
Guaranteed Income Bonds
Guaranteed income bonds offer regular payments based on a rate of interest agreed at the outset, plus the return of your capital at the end. The term of guaranteed income bonds is typically 1 to 5 years, and income can be taken annually or monthly.
Guaranteed Growth Bonds from NS&I
Guaranteed Growth Bonds from National Savings & Investments (NS&I) are backed by a guarantee from HM Treasury, which means you absolutely cannot lose your initial capital. The bond offers guaranteed growth based on a rate of interest fixed at the outset, and rather than give you a regular payout like the Guaranteed Income Bonds above, Guaranteed Growth Bonds pay the interest annually into your Bond, on the anniversary of your investment.
Find out more about guaranteed investments, make an investments enquiry or ring our freephone 0800 678 5929
