Investing in Bonds for a Stable Income: What You Need to Know
Investing can be a life-changing decision if you choose the right channel for increasing your income.
Wise investments bring stable income, and bonds and bond funds are a popular investment choice for those looking for a fixed-income option.
A bond represents an obligation from a borrower, such as a company or government, to repay the investor. The Federal Government of Nigeria issues bonds to fund its projects, budget deficit and developmental goals.
Considerations When Choosing the Right Bond:
- Types of Bonds: Government bonds, as opposed to corporate bonds, are considered safer. The government can print currency to pay back its debts, and there are severe consequences if the government is not creditworthy.
- Advantages of a Bond Fund: Bond funds are mutual funds that seek competitive returns by investing in a portfolio of different debt instruments, such as government bonds, corporate bonds, and mortgage-backed securities, among others. A bond fund's principal purpose is to produce a consistent income stream for investors who want to participate in bonds but do not have the minimum capital requirements for direct investing.
- Costs of a Bond Fund: An investor pays annual fees to cover administrative and management fees and gains exposure to various bonds. Interest payments can also be reinvested automatically, resulting in compound growth over time and a significant increase of the initial investment.
While bond funds are not a guaranteed return investment, they are a good choice for medium to long-term wealth appreciation. It is always preferable to seek the opinion of a financial advisor to determine the best solutions for your investing needs.
If you are interested in learning more about investing in bonds and bond funds, Stanbic IBTC Asset Management Limited offers top-notch financial advice.
You can visit the website Stanbic IBTC Bond Fund or send an email to [email protected] or call 0700 909 909 909.
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