Investing in bonds

Investment bonds

The collapse of the stock market in 2008 has led many investors to look elsewhere for safe places to put their money. While they can certainly store it in a savings account and accumulate interest, those who want to invest for the long term are rapidly turning to investment bonds. These bonds, also known as "insurance bonds," are ideal for someone looking to leave money for the next generation. These bonds were specifically invented to exploit quirks in the UK tax code, and while changes in the code have left many to switch to Unit Trusts and OEICs instead, investment bonds are still popular and widely regarded as a very secure investment. They are still one of the most popular ways for those with large savings to pass that money on to their children and grandchildren, especially as they occupy a unique space in the tax code.

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Investment bonds are offered by insurance companies as a way to allow individual investors the ability to circumvent much of the capital gains and inheritance taxes. This ensures that the maximum amount of their investment is passed on to the next generation, and that the money is as safe as possible. Investment bonds are backed up both by the issuer and the government, and since they are explicitly designed to be passed on only to the investor's heirs, they tend to have very favorable rates of interest. After all, if the money will not be used for at least fifteen or twenty years, an insurance company is able to invest it in long-term, high-yield products like infrastructure or starter capital for new business ventures. This diversity is, in fact, one of the main draws for investment bonds, since it allows investors to put their money where they find their personal preferences or political beliefs lie.

There are a great variety of investment bonds on the market today. Originally they were only invested into the for-profit portion of the issuer's fund, but now a great variety is offered, enabling investors to put their money in everything from hydroelectric power plants to exciting third-world business ventures to entire countries. While this amazing diversity may be too much choice for some, discriminating investors with a knowledge of world markets are able to pick and choose sure winners for their bonds. Diversity remains important as no one investment is sure to pan out, but insurance funds work to only chose the best and surest funds for their investors.