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Two ways to use investing in bonds to your advantage

by , 11 February 2015

Bonds are a low-risk investment option. They have a number of uses depending on what your investment goals are.

So what role can bonds play in your financial future?

Let's take a closer look…

Why investing in bonds can be a wise decision

There can be a variety of reasons for investing in bonds. It depends on your circumstances, and your investment and financial goals.

To see how you can use bonds to your advantage and to help you reach your financial goals, let’s take a look at a few different scenarios…

Investing in bonds for certainty

If you’re nervous about putting your money into the stock market and you hold a lot of cash in the bank, you could put that money to use in bonds.

By investing in bonds, you have the certainty of knowing how much interest you’ll earn for the term of the bond. And if you opt for government bonds, you have the certainty of getting your initial investment back at the end of it.

Investing in bonds helps to lower your portfolio’s risk

If you have a lot of money in shares, the risks can be quite high. If the market takes a tumble, so will the theoretical value of your portfolio.

To reduce your overall portfolio risk, you could sell some of your shares and put that cash into bonds instead.

This spreads the asset risk in your portfolio.

As you near retirement, you may want to increase your investment in bonds and reduce your exposure to shares.

This will help you to forecast your future income with more certainty.

So there you have it, two ways to use investing in bonds to your advantage.

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Two ways to use investing in bonds to your advantage
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