13:28 15 September 2014
If you are in search of a good long-term investment, why don’t you think about a bond? A bond will go for a minimum of £10,000 and a maximum of £1m and no withdrawals can be made for the duration you put away your money for. (A few banks will allow you to withdraw but will impose a penalty on that). A bond will however see few investments since most people will not be willing to lock away their cash for such a long time.
However, if there is one sure way to make significant money out of interest, it is via a bond. More so, with the expected rise of bank rates to 3pc, there is also expectation of rise in rates of bonds. Only the worst case of economic failure would see a bond make no significant interest in 10 years.
The first rise is expected to occur in 2015 although this will somehow be a minimal rise. It is although tricky in that most predictions are being made that the bank rates would see a rise of up to 5pc in 5 years.
Keeping in mind that a bond is a fixed interest saving, it would thus be better saving your cash in a bank. Account holders of a bank gaining interest monthly would foresee huge interests as compared to those of bonds in the 10-year term.
There is even more contradiction that could occur if the bank rates hit 4 pc. Minus the tax, this would be an interest of 3.2 pc, which means in 10 years that would give more interest than the best 5 yrs fixed rate interest deal (Nisa) of 2.85.
The longest bond in the market is the 10-year saving from Leeds but a 7 yr bond with 3.52 pc is also available from Secure Trust.
Therefore, as you seek long-term investments, it is sensible to reflect on all options and exhaust them in contrast to their interests and risks.