How Can Corporate Bonds Improve an Investor’s Portfolio?

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As the retirement system in the UK is constantly being reformed and changed an increasing number of people are deciding to shift from traditional pensions to self-funded retirement plans, investment schemes are becoming more popular. Capital bonds, in particular, have gained popularity in recent years because they are offering more stability compared to other investment structures (i.e. shares).

From finding the best investment opportunities for a client, to establishing ties with high-profile, high yield companies in the bond market, a consulting service such as Amyma can help to facilitate an investor’s quest for profitable capital bonds.

What are capital bonds?

Capital bonds are forms of debt instrument issued by UK or internationally-based companies. These bonds function as a lending mechanism to the corporations and provide investors with regular interest payments or an increase in the principal returned after the end of the maturation period.

Along with debentures, which are equally issued by companies but are considerably more short-lived – corporate bonds can form the basis of an investor’s portfolio and help them reach their saving goals in the long run.

How can bonds help?

Corporate bonds are higher up than shares in the capital structure, therefore they are more predictable than shares from the same company. Bonds can be ideal for defensive investors who are interested in reducing the risks associated with investing directly in shares with a single company.

Bonds issued by corporations are essentially a type of debt, therefore income is guaranteed provided the company is still trading. Depending on the type of bond (some investors may choose to receive their initial capital plus profits after the maturation period) income can be regular or a one-time occurrence. Whatever the type, bonds guarantee a regular income stream via the coupon payments as well as the return of capital after the maturity period is over.

Moreover, historically, corporate bonds perform better during times of weak economic growth because of duration and capital structure. Last but not least, bonds offer a viable alternative to shares, since they are diverse and are positioned defensively to cover the diverse needs of the company.

Increasingly, capital bonds such as environmental bonds and renewable energy bonds are used for companies that are about more than mere profit, such as the protection of the environment and the quest for renewable sources of energy.

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