Independent Financial Life Planners Bishop's Stortford: Bonds have their own language

Monday, 2 March 2015

Bonds have their own language

Most financial plans and investment wrappers involve Bonds in Enable’s IFA’s experience. While bonds work in a fairly simple way, there is actually quite a specific vocabulary that explains exactly what they do and is useful in the understanding of your financial investments.

The first word is coupon, this is the interest rate that investors are paid on the bond – the name originates from the time when physical bonds came with a coupon attached that you would rip off and hand in to get your interest.

Another word to understand is maturity – and you will also see “redemption date” to explain when you are due to get your initial investment back so long as you bought the bond when it was issued. If a bond matures, or has a redemption date in 2025, that is when you would see repayment.
If you don’t want to hold your bond until maturity it is possible to trade it on the Stock Exchange. Trading it gives rise to two more bond related turns of phrase one is par. If a bond is trading for more than the amount originally invested in it – for example a £1,000 bond trading for £1,200, it is “above par”, and if it is trading at £900, it is “below par”.

Yield is the other word you will hear which is the rate of return. While the coupon is a fixed percentage of the bond’s par value, the yield fluctuates as the trading price of the bond goes up or down. The bonds’ values themselves go up and down in value if you trade them on the stock market, so the value of your investment can go up or down. Enable’s IFA’s in Bishop’s Stortford can help you will the language of wealth management and your investments.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE

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IFA Bishop's Stortford

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