Saving for a home make-over: investing in corporate bonds

A home make-over is a wise investment in the current economic climate. A vacation can be costly, and all that money is gone in just a few weeks – leaving the rest of your year at work and at home. This all means that you need to feel at home in your house, and this can be achieved with a bit of TLC – and some new decor. For maximum impact, rather than just the purchase of a new vase, transforming a whole room at a time can really lift your surroundings – although you may need to save for a while to be able to do this. Make sure that your money works as hard as you do by selecting a good investment product to grow your home make-over fund.

In general, the largest returns come from the riskiest investments – all well and good if you have cash to throw around. However, no risk investments – such as standard savings accounts – offer a very low rate of return at the moment, thanks to the low interest rates currently prevailing. To achieve reasonable growth without reckless Wall Street risk, you may wish to consider an option that sits somewhere in the middle ground – corporate bonds.

Corporate bonds are issued by companies looking to secure finance – when you buy into corporate bonds, you are effectively holding some of the company’s debt. In return for helping out in this way, the company offers to pay back a fixed rate of interest over the term of the bond, which is usually a couple of years – this is why corporate bonds are also known as fixed interest securities. All going well, when the bond matures; that is, the agreed period of investment is over, your bonds are cashed in – hopefully not only paying back your initial investment, but realising a little extra too.

The risk involved in the investment is that the company does not perform as predicted, and cannot afford to pay you back as agreed. However, it is important to note that corporate bonds owners are at the head of the line, with share holder’s dividends being paid after bond holders have been looked after in the event of financial trouble. Additionally, the way that private investors get a hold of corporate bonds is usually through brokers like Legal & General, who take investors money and pool it together into a large fund. This fund is then invested in a portfolio of different bonds – thus spreading the risk involved. These portfolios will each have predicted risk and return, so if you want to play it safe, there are options open for you – leaving the main thing for you to worry about being the new colour scheme for your living room!