The term bond has in the past been the generic term for fixed interest stocks with security (the borrower is ‘bound’ to repay capital). Gilts are therefore bonds. However, in recent times the term ‘bond’ has also been used in the name of some equity based investments, for example investment bonds issued by insurance companies.
Nowhere else in the investing world can the interested investor get more helpful information than that available from the various bond rating agencies
Few investors trade in order to lose money. For those seeking to make a profit, comparing the potential returns over different time spans of different instruments is essential. In that effort, calculating yield is central.
It’s often said that government bonds represent one of the lowest possible risks for an investor. In general, true - but much depends on which government issues them and which investor is buying.
Every bond carries some risk that the issuer will default on repayment of the principal or suspend interest payments. Once that risk is measured (see ‘Measuring Risk’ elsewhere in this series), then what?
First, a confession: Interest rates are unpredictable. But then, you knew that already. Fortunately, they’re not entirely unpredictable. Good bets are possible.
