London, April 13, 2022 (GLOBE NEWSWIRE) -- If you’ve noticed the hotel you’re looking to book for an upcoming summer holiday is more expensive than last year or that your grocery bill has gone up even though you’re buying the same amount of food, you’re witnessing the results of the latest inflation surge.
While the rise in prices on goods and services over the last few months has been mostly attributed to the world opening back up again, we don’t know exactly how long it will last or just how we should react financially. For the everyday consumer, increased prices may mean limiting any splurge spending to avoid a big hit to your wallet. But for those who invest, you’re likely more concerned about your money losing value in the market.
We spoke with Mark Sutton an asset management advisor for a renowned banking institution earlier this week:
“Keeping your money in short-term fixed rate bonds or Gilts is a similar strategy as maintaining cash in a savings account. Your money is safe and accessible. And if rising inflation leads to higher interest rates, short-term fixed rate bonds are more resilient. It’s for this reason I advise my clients that it’s best to stick with short to intermediate-term fixed rate bonds and avoid anything long-term focused. If your money is in a Gilt your money is safer than it would be in your bank account because the HM treasury will guarantee up to £5m of your investment and it's just as accessible whenever you need it. The huge benefit you get with a Gilt is being paid up to 5% fixed interest per annum. Some bank based bonds can pay as high as 10%, sometimes even 11%. And plus as a fixed rate bond is a type of savings account, the Financial Services Compensation Scheme (FSCS) will cover up to £85,000.00 of your deposit or £170,000.00 per joint account on any UK bank or building society deposits," said Mark Sutton.
What are fixed rate bonds?
A fixed rate bond is a type of savings account that lets you put your money away for a set period of time in return for a fixed amount of interest on your cash. By financial definition you are actually loaning your money to a bank and they are paying you back the original amount plus any interest earned on the dates set out on the terms and conditions. As a fixed rate bond is a type of savings account, the Financial Services Compensation Scheme (FSCS) will cover up to £85,000.00 of your deposit or £170,000.00 per joint account on any UK bank or building society deposits. In case the bank goes out of business, the FSCS will also cover the interest you’ve earned up until that point as well, provided the total invested amount in the account is still under the £85,000.00 limit or £170,000.00 per joint account.
How do fixed rate bonds work?
Fixed rate bonds are available with different terms. In general, the longer the term, the higher the interest rate. Most fixed rate bonds require a minimum deposit to open the account. Unlike many other savings accounts, you are usually only allowed to pay in once, which is when you open the account. Providers of fixed rate bonds may give you the option to have earned interest paid out either bi-annually or annually. Most bonds require you to lock away your money for a set period of time, however some bonds offer an "easy access" option which allows you to access your capital at any time by giving notice and paying a liquidation fee. With fixed rate bonds, the "term" is the amount of time you choose to lock your money away for, i.e. 1 year or 2 years.
Can the interest rate change on a fixed rate bond?
No, the interest rate is fixed until your account matures.
What are Gilts?
A Gilt is a bond issued by the UK Government. It’s one of the many ways the HM Treasury generates annual revenue. The benefit of a gilt is unlike a corporate bond, the full value of the bond issue is guaranteed by the HM treasury. So if you were to invest up to £5,000,000,00 in UK Treasury Gilts for example; the full value of your capital is guaranteed, unlike a bank based bond that only has a protection limit of £85,000.00.
What are the benefits of a Gilt?
The benefit of owning a Gilt is that investors know with certainty how much interest they will earn and for how long. If you are interested in safely investing a lump sum, a bonus from work, proceeds of a house sale or even an inheritance, then a Gilt is likely to be your best bet.
How do Gilts work?
In general, the longer the term, the higher the interest rate. Most Gilts require a minimum deposit to open the account. Unlike many other savings accounts, you are usually only allowed to pay in once, which is when you open the account. The HM Treasury gives you the option to have earned interest paid out either bi-annually or annually. Most Gilts require you to lock away your money for a set period of time, however some companies offer an "easy access" option which allows you to access your capital at any time by giving notice and paying a liquidation fee.
Can the interest rate change on a Gilt?
No, the interest rate is fixed until your account matures..
In summary, taking advantage of short term fixed returns can most certainly provide stability to your portfolio whilst paying you a regular income. The team of investment professionals at searchbestinvestments.com, can guide you through the various options available, ensuring your investment gives you the best returns possible.
Have a look at what they have on offer at www.searchbestinvestments.com
Disclaimer: The information in this press release is for general information only. Search Best Investments is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your unique circumstances.
