More secure than shares
Bonds are a more secure investment than shares.
Full return on your investment.
You usually get all your capital back on the final maturity date.
The yield is usually higher on a bond than on a savings account.
What is a bond?
A bond is a debt instrument issued by a corporation (a corporate bond) or a country (e.g. State note in Belgium). So when you buy a bond you are actually lending money to a country or a corporation. The bondholder receives interest annually. The loan matures after a certain period of time, at which point you usually get your initial investment back.
Please note: A bond is an investment and is therefore not totally risk-free. Corporations and countries can go bankrupt or not have enough capital to repay the bond. If the bond is issued in a currency other than EUR, you risk losing some of the money you have invested if the exchange rate moves unfavourably.
Why opt for bonds?
You are looking for a high yield, but do not want to take too much of a risk? The yield is usually higher on a bond than on regular savings accounts. And while the risk is higher, bonds are more secure than shares.
What is the yield on bonds?
Most bonds have a fixed interest rate, so you know what yield you can expect when you invest. However, this is not the case with variable-interest bonds, which also exist.
How much does it cost to invest in a bond?
How much money do you need to invest?
The primary price of the bond (the price when it is issued) is set by the corporation or country that issues the bond. This issue price depends on the bond. The secondary price of the bond (the price when it is sold on) depends among other things on how the market rate changes.
Charges and taxes
A commission is also due over and above the issue price (for instance 1.50% of the issue price). You pay withholding tax on the interest (currently 30%). To invest in bonds you need a securities account. This is free of charge at %bank%%.