Corporate & Convertible Bonds
What are Bonds?
Corporate Bonds are essentially loans made to companies from investors. The bonds are issued by the companies aiming to raise capital to invest in their business. They have a nominal value which will be paid back out to the investor at the stated later date (this is known as the Redemption date). They also tend to pay a fixed rate of interest each year - although this can vary depending on the bond.
Convertible Bonds give the holder the option to exchange the bond for a predetermined number of shares in the issuing company. When the bonds are first issued, they are very similar to a Corporate bond but generally with a lower interest rate. The benefit comes from the potential for the underlying price in the stock to rise. If the underlying stock performs poorly, there maybe no benefit in converting into ordinary shares and the investor can remain holding onto the bond.
Bonds are bought and sold on the open market and their price is constantly moving. This means that although safer than equities, there is an element of risk involved and you may lose more than your initial investment.
| Five Key Benefits of Trading Bonds with Halifax Share Dealing |
| 1. Convertible bonds are usually issued offering a higher yield than obtainable on the shares into which the bonds convert |
| 2. On the whole, Bonds tend to be safer than ordinary or common shares for the investor |
| 3. Bonds are designed so investors can benefit from a more regular income |
| 4. Invest in a wide variety of bonds in many different sectors and structures |
| 5. If you need to sell a bond before maturity, you can do so easily because of the size and popularity of the market. |
Which accounts can I hold Bonds in?
Share Dealing Account - the simple way to trade Corporate and Convertible Bonds
Self-Select Stocks & Shares ISA - hold ISA eligible Corporate Bonds in a tax efficient ISA and prevent your gains from going to the taxman!*
SIPP - invest for your retirement with a tax efficient pension scheme
