d on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, wh

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.

Local and foreign government bonds

It is possible to invest in these and they work like gilts. The only difference is that the risk of non payment is greater, so the yield is higher.

Guaranteed income and growth bonds

These guarantee a relatively high return over a period, such as five years, with a full return of capital. They are more attractive during a period of falling interest rates, as the level of interest reflects the going rate at the time of Purchase. Income payments are made free of basic tax. They are not suitable for non taxpayers as tax deducted cannot be recovered.

With income bonds the interest is paid out periodically whereas with growth bonds it is retained till the end of the investment period. Otherwise, they are identical.

High income bonds

Here a high fixed rate of interest is paid for a period, usually around five years. The problem with them is that the capital value can be eroded. Usually there is a condition that, if a selected stock market index falls over the investment period by specified amounts, then the capital invested will be reduced by an appropriate percentage.

The lesson here is to read the small print.

Corporate bonds

These are company fixed interest investments. They operate like gilts as the interest rate is fixed and so the market price varies. Interest is taxable but capital gains are tax free.

Debentures and loan stock

Debentures are company fixed interest stocks which are secured on the company's assets. The term loan stock is used to describe unsecured company fixed interest stocks. Both have redemption dates when the loan will be paid back at a stated price.

Like gilts, the rate of interest is fixed and the market price will vary. Interest on loans is payable whether or not there are any profits and takes preference over dividends. Interest rates are usually quoted gross.

Also like gilts, capital gains are tax free.

Preference shares

These are shares in a company rather than loans to it and usually do not have a redemption date. A fixed dividend is payable out of profits, usually before any dividend on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, whi

od, such as five years, with a full return of capital. They are more attractive during a period of falling interest rates, as the level of interest reflects the going rate at the time of Purchase. Income payments are made free of basic tax. They are not suitable for non taxpayers as tax deducted cannot be recovered.

With income bonds the interest is paid out periodically whereas with growth bonds it is retained till the end of the investment period. Otherwise, they are identical.

High income bonds

Here a high fixed rate of interest is paid for a period, usually around five years. The problem with them is that the capital value can be eroded. Usually there is a condition that, if a selected stock market index falls over the investment period by specified amounts, then the capital invested will be reduced by an appropriate percentage.

The lesson here is to read the small print.

Corporate bonds

These are company fixed interest investments. They operate like gilts as the interest rate is fixed and so the market price varies. Interest is taxable but capital gains are tax free.

Debentures and loan stock

Debentures are company fixed interest stocks which are secured on the company's assets. The term loan stock is used to describe unsecured company fixed interest stocks. Both have redemption dates when the loan will be paid back at a stated price.

Like gilts, the rate of interest is fixed and the market price will vary. Interest on loans is payable whether or not there are any profits and takes preference over dividends. Interest rates are usually quoted gross.

Also like gilts, capital gains are tax free.

Preference shares

These are shares in a company rather than loans to it and usually do not have a redemption date. A fixed dividend is payable out of profits, usually before any dividend on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, wh

s that the capital value can be eroded. Usually there is a condition that, if a selected stock market index falls over the investment period by specified amounts, then the capital invested will be reduced by an appropriate percentage.

The lesson here is to read the small print.

Corporate bonds

These are company fixed interest investments. They operate like gilts as the interest rate is fixed and so the market price varies. Interest is taxable but capital gains are tax free.

Debentures and loan stock

Debentures are company fixed interest stocks which are secured on the company's assets. The term loan stock is used to describe unsecured company fixed interest stocks. Both have redemption dates when the loan will be paid back at a stated price.

Like gilts, the rate of interest is fixed and the market price will vary. Interest on loans is payable whether or not there are any profits and takes preference over dividends. Interest rates are usually quoted gross.

Also like gilts, capital gains are tax free.

Preference shares

These are shares in a company rather than loans to it and usually do not have a redemption date. A fixed dividend is payable out of profits, usually before any dividend on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, wh

he term loan stock is used to describe unsecured company fixed interest stocks. Both have redemption dates when the loan will be paid back at a stated price.

Like gilts, the rate of interest is fixed and the market price will vary. Interest on loans is payable whether or not there are any profits and takes preference over dividends. Interest rates are usually quoted gross.

Also like gilts, capital gains are tax free.

Preference shares

These are shares in a company rather than loans to it and usually do not have a redemption date. A fixed dividend is payable out of profits, usually before any dividend on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, wh

d on ordinary shares (hence the preference). The market price will vary in accordance with the current rate of interest. Dividend rates are usually quoted net of tax.

Other corporate bonds

Zero coupon bonds are sometimes available. Interest is not paid out but is 'rolled up' till redemption or sale and is then subject to capital gains rather than income tax.

‘Bulldog' bonds are those issued by foreign companies on the sterling market. They give higher yields because of the greater risk.

Eurosterling bonds are issued by companies in the EU (other than UK companies). They are usually bearer bonds, which means they are like currency notes so you need to keep them safe!

Corporate bond funds

Unit trusts and investment trusts are mostly equity investments. However, there are also corporate bond funds which invest in a number of individual company bonds, thus spreading the risk.

High yield corporate bond funds invest in more risky corporate bonds, which have a higher yield but more risk of capital loss.