Corporate bonds are a way in which companies can borrow money direct from investors, for example to fund business development or for mergers and acquisitions. When you buy a corporate bond, you are lending your money to the company concerned almost exactly as a bank would – i.e.: in exchange for the promise that they will pay you back a set amount of money on a pre-agreed future date and in the meantime, pay you an income in the form of interest on that loan.
The potential benefit of corporate bonds is that they should pay you a higher income than your building society account but with a lower risk to your capital than equities. The downside is that, if the company you have chosen goes out of business, or even just gets into passing difficulties, you may not receive all the income you were promised and/or perhaps not get back your original investment on that agreed future repayment date.
Past performance is no guide to the future. The value of investments can go down as well as up and you may get back less than you invested.
When investing internationally changes in currency exchange rates may affect the value of an investment. Smaller companies and emerging markets carry higher level of risk than larger, more established companies and markets. Consequently, the suitability of any particular stock market investment depends on your personal circumstances and your attitude to risk.
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