Protect Your Savings With a Fixed Rate Bond

In these uncertain economic times, it can be hard to find an investment that you are comfortable with. Many investments can carry certain amounts of risk with them and there is the uncertainty of whether you will get back everything you have put in. However, there is a potential solution to this problem and it comes in the form of fixed rate bonds.

Whereas investments like equities and property cannot guarantee full returns on your capital, fixed rate bonds can. If you are happy to put your money away and leave it untouched for a number of years, this could be the right investment for you. Bear in mind, fixed rate bonds will require a lump sum investment, but this often works out for the best because it maximizes the interest you can receive.

If you do your research you will find unlike the average savings account, which is offering around three per cent in interest, the average fixed rate bond has an interest rate closer to five per cent. And let’s not forget there is also the guarantee that this will remain the case for a set period of time until the account reaches maturity as it is not affected by changes in the base rate.

You can choose to receive your interest earnings either monthly, annually or when the bond reaches maturity, so you could have a nice lump sum at the end of the investment.

However, it has to be said that a fixed rate bond can have some drawbacks. Unlike a savings account or cash ISA where you can withdraw and transfer money whenever you like, with a fixed rate bond there are more restrictions. If you decide to put your money away for say five years, it is best to leave it untouched; otherwise you could incur withdrawal charges or even lose part of your initial investment if you withdraw your money before the bond has reached maturity.

With so many fixed rate bonds to choose between, it is a good idea to shop around for the best deal – otherwise you may end up regretting putting your hard earned money into a plan which isn’t offering you the best rate of interest.

You will also need to decide the length of the bond. In this case you are not limited in your choices, you could put your money in a 3 or 6 month bond if you are looking to invest in the short-term, or if you are thinking more long-term a 5 or 6 year bond could suit you.

To get a better insight in to what is available, check out some comparison sites like http://www.fairinvestment.co.uk and http://www.moneyfacts.co.uk – where you can compare a wide selection of fixed rate bonds and find the right deal for you.

It may also be a good idea if you have any questions or concerns to speak to an independent financial adviser, who will be able to give you a clearer idea as to what type of investment will best suit your financial situation.

Andy writes for a number of financial websites specializing in savings and investments.