Looking to diversify your investment portfolio while getting a steady income stream at the same time? Check out the best bonds to buy now and what you should consider before investing in them.
Best Bonds to Invest Now
Discover the top bonds to consider to start investing today, and find out more about them in the sections below.
Best UK Bonds | Price | Fund Size | Yield | Income Paid |
|---|---|---|---|---|
Schroder Sterling Corporate Bond | £157.60 | £1.134bn | 5.59% | Quarterly |
Schroder All Maturities Corporate Bond | £48.02 | £941.83m | 4.01% | Annually |
Liontrust Sustainable Future Monthly Income Bond | £76.23 | £626.44m | 5.91% | Monthly |
Royal London Corporate Bond | £80.56 | £1.11bn | 5.32% | Quarterly |
Janus Henderson Strategic Bond Fund | £112.60 | £2.796bn | 2.70% | Quarterly |
Capital Group Global High-Income Opportunities Fund | £2,050.00 | $1.444bn | 6.79% | Quarterly |
Rathbone Ethical Bond Fund | £204.10 | £2.132bn | 4.70% | Quarterly |
Best Platforms to Invest in Bonds
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 8.8 | Visithome.saxo | CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.74% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money. Losses can exceed deposits on some products. | |
 | 9.1 | Visitinteractivebrokers.com | ||
 | 8.3 | Visithl.co.uk | ||
 | 8.1 | Visitgetchip.uk | ||
 | 5&me | 7.9 | Visitmandgwealth.me | |
 | 8.1 | Visitwealthyhood.com | ||
 | 7.5 | Visitwww.moneyfarm.com/uk/ | ||
 | 7.6 | Visitii.co.uk |
Best Bonds Overview
1. Schroder Sterling Corporate Bond
Sterling bonds refer to bonds issued by corporations denominated in the British Pound Sterling. True to its name, the Schroder Sterling Corporate Bond is a collection of corporate bonds backed and issued by companies in the UK.
Sterling corporate bonds don't have returns as high as sterling high-yield bonds or even sterling strategic bonds, but for those who want better returns, the Schroder Sterling Corporate Bond is definitely a more attractive option than gilts.
Price — £157.60
Yield — 5.59%
Income paid — Quarterly
Visit Hargreaves Lansdown to invest in Schroder Sterling Corporate Bond
2. Schroder All Maturities Corporate Bond
The primary focus of the Schroder All Maturities Corporate Bond is to provide income and capital growth by investing in a diversified portfolio of non-government bonds across all maturities – this means that you’ll get exposure to a wide range of sectors, as well as different holding periods.
Possible investments can include cash, derivatives, transferable securities, and other types of investment bonds. Less than 40% can be allocated towards non-sterling bonds.
Price — £48.02
Yield — 4.01%
Income paid — Annually
Visit Interactive Investor to invest in Schroder All Maturities Corporate Bond
3. Liontrust Sustainable Future Monthly Income Bond
The Liontrust Sustainable Future Monthly Income Bond is a collection of both government and corporate bonds. Most of the funds are allocated toward investment-grade corporate bonds since they tend to have a higher yield.
Its goal is to provide bondholders with a stable source of income monthly while also allowing them to grow their money along with the economy. If this aligns with yours, then the Liontrust Sustainable Future Monthly Income Bond is one of the best choices for you.
Price — £76.23
Yield — 5.91%
Income paid — Monthly
Visit Hargreaves Lansdown to invest in Liontrust Sustainable Future Monthly Income Bond
4. Royal London Corporate Bond
The Royal London Corporate Bond is a medium-term bond issued by Royal London, one of the UK's oldest and most respected life insurance companies.
It has a maturity period of 3-5 years. Around 80% of the fund is allocated towards investment-grade sterling corporate bonds, as well as other assets.
Price — £80.56
Yield — 5.32%
Income paid — Quarterly
Visit Interactive Investor to invest in Royal London Corporate Bond
5. Janus Henderson Strategic Bond Fund
If you're looking for a bond fund that is diversified across different high-yield markets, look no further than the Janus Henderson Strategic Bond Fund. It specifically selects high-yield, investment-grade corporate, and government bonds.
Since it has assets in currencies other than GBP, it's a great way to reduce the risk of currency exchange movements. In times when the pound is weaker than other currencies, this bond fund should be a strong addition to anyone's portfolio.
Price — £112.60
Yield — 2.70%
Income paid — Quarterly
Visit Hargreaves Lansdown to invest in Janus Henderson Strategic Bond Fund
6. Capital Group Global High-Income Opportunities Fund
Although most investors who opt for bonds do so to minimise their risk, there are some who also want the best of both worlds.
Enter the Capital Group Global High-Income Opportunities Fund, whose goal is to provide a bigger return to bondholders without taking on an excessive amount of risk. This bond fund invests in government and corporate bonds from around the world, specifically choosing emerging markets and corporations with high potential.
Price — £2,050.00
Yield — 6.79%
Income paid — Quarterly
Visit Interactive Investor to invest in Capital Group Global High-Income Opportunities Fund bonds
7. Rathbone Ethical Bond Fund
Just like Capital Group's fund, Rathbone Ethical Bond Fund also aims to manoeuvre between different types of bonds to maximise your return while minimising risk at the same time.
To get higher returns, 80% of the fund is allocated towards investment-grade corporate bonds while 20% is invested in bonds with a high credit risk. Also, the fund targets sterling corporate bonds specifically since these bonds have consistently achieved better returns compared to the average returns of competitors in the same sector.
Price — £204.10
Yield — 4.70%
Income paid — Quarterly
Visit Hargreaves Lansdown to invest in Rathbone Ethical Bond Fund
What Are Bonds and How Do They Work?
Bonds are fixed-income securities issued by governments, corporations, or other entities to raise capital for projects and other investments.
You can think of them as another type of loan. When you invest in a bond, you’re letting the issuer use your money temporarily in exchange for regular interest payments. These payments usually amount to a fixed percentage of the bond’s face value.
The issue will continue paying the bondholder the interest amount until the bond reaches its maturity date. At this point, the bondholder should get their initial investment back, and they can opt to reinvest their money or take it elsewhere.
Due to the nature of this investment vehicle, bonds are considered quite stable and not as risky. They’re typically held for a specific period of time, which can be short-term, medium-term, or long-term.
The bond trading market operates in a continuous trading cycle from Sunday evening to Friday evening since stock exchanges all over the world may have overlapping hours.
In the UK, the Financial Conduct Authority (FCA) is responsible for authorising and regulating bonds.
What are the different types of bonds?
These are seven types of bonds available for investors in the UK:
Gilts - Term used to refer to government bonds, particularly in the UK
Indexed Linked Gilts - Interest payments are adjusted for inflation
Conventional Gilts - Issued in the local currency and aren’t adjusted for inflation
Undated or Perpetual Gilts - Bonds that have no maturity dates
PIBS (Permanent Interest Bearing Shares) - Refers to fixed-interest shares issued by building societies
Convertible bonds - Refers to fixed-income corporate bonds
Subordinated bonds - Refers to Unsecured bonds
Risks and Benefits Associated With Bonds
Although bonds are considered low risk compared to other types of investments, it’s important to remember that there’s no such thing as a 100% risk-free investment option. Here are some pros and cons you need to know beforehand.
- Regular income – Bonds provide a steady stream of income through periodic interest payments, typically paid semi-annually. This predictable cash flow can be attractive for investors seeking a stable source of income, such as retirees or those looking to balance their investment portfolios.
- Diversified – Adding bonds to a portfolio can help diversify investments and reduce overall risk. Since bonds generally have a low correlation with stocks, they can help smooth out portfolio volatility and provide a cushion during periods of stock market downturns.
- Liquid – Many bonds are fairly liquid and easy to buy and sell in the secondary market, allowing bondholders to access their funds relatively quickly if needed. This is especially true for bonds issued by large corporations and governments.
- Low risk – Bonds have a reputation for being relatively safe investments, as the issuer is obligated to repay the principal amount at maturity. This makes them quite appealing to conservative investors who prioritise preserving their capital over pursuing higher returns.
- Interest rate fluctuations – Bond prices have an inverse relationship with interest rates. The rising interest rates cause bond prices to drop, and vice-versa. So, if you need to sell before the bond matures, you might not get a good price if the interest rates have increased since the bond was purchased.
- Credit risk – Also known as default risk, this is the possibility that the bond issuer, which again can include corporations and governments, will go bankrupt and fail to pay their obligations. Although large corporations and governments with high credit ratings, like the UK and the US, tend to be safe investments, it doesn’t hurt to be extra careful when investing in smaller issuers.
- Lower return potential – Bonds may be safer than other high-risk investments, but the rewards are also typically smaller. This may be enough for those who just want to preserve their capital or hedge their money against inflation, but it may not be sufficient for those who are looking to exponentially multiply their hard-earned money.
How much money you need to get started with bonds depends on your financial capability and your situation.
If you’re a complete beginner and are just dipping your toes into the world of investing, starting with the minimum amount you can get away with is recommended.
In the case of bonds, this amount is highly dependent on the type of bond you want to invest in. Investment bonds issued by governments or established corporations typically start at £5,000.
That said, some bonds cost much less, too. For instance, you only need £25 to invest in premium bonds offered by the NS&I (National Savings & Investments). Instead of regular interest payments, though, each bondholder gets the chance to win the lottery each month.
Ultimately, the best bonds for you are those that fit within your budget and align with your financial goals.
Best Platforms to Invest in Bonds
1. eToro - Best Beginner Platform for Bond ETFs
Minimum deposit | £40 |
|---|---|
Inactivity Fee | £8 |
Investment options | ETFs, stocks, cryptocurrencies, forex, indices, commodities |
Perhaps one of the most well-known online investment platforms today is eToro. It offers exposure to various assets, including bond ETFs and cryptocurrencies.
This platform is useful for beginners and advanced traders, thanks to its easy-to-use interface and different analytic tools.
A standout feature from eToro is the Copy Trading feature, which lets users literally copy the trades of a top-performing trader. If you’re a beginner and you’re unsure how to start trading bond ETFs, this should be quite helpful.
Keep in mind, though, that all transactions are done in USD, so you’ll be subject to currency exchange fees.
2. Interactive Investor - Best Platform for UK Bond Funds
Minimum deposit | £0 |
|---|---|
Inactivity Fee | £0 |
Investment options | Gilts and bonds, ETFs, shares, IPOs, Investment trusts, and more |
This UK-based trading platform offers tens of thousands of investment options, including bond funds and bond ETFs.
Depending on your subscription plan, you get an Individual Savings Account (ISA) or a junior ISA with your account, up to two free monthly trades, and reduced rates on trading fees.
Withdrawing from the Interactive Investor is hassle-free and quick. You can get your funds in as little as 24-48 hours, and the fees are minimal.
Lastly, customer service is top-notch. Subscribers to Interactive Investor can dial in anytime, and the customer support team is always happy to help.
3. Hargreaves Lansdown - Best Platform for Investing in Bonds Directly
Minimum deposit | £0 |
|---|---|
Inactivity Fee | £0 |
Investment options | Corporate and government bonds, domestic and international shares, ETFs, and more |
Hargreaves Lansdown is one of the largest investment companies in the UK. It’s listed in the FTSE 100 and has a market cap of almost £4 billion as of this writing.
Hargreaves Lansdown offers an extensive library of investment options, which includes bond ETFs and bond funds. They also have a nifty mobile app, allowing traders and investors to check their portfolios anytime they wish. Plus, their customer service is superb.
Better yet, Hargreaves Lansdown has plenty of tools you can use to help you determine the best picks. The list includes performance charts, investment calculators, and more.
The only downside of Hargreaves Lansdown is the relatively higher fees compared to other established platforms like eToro and Interactive Investor.
These days, bond platforms, or any trading platforms for that matter, are generally considered to be safe. Most reputable online trading and investment platforms, such as the ones mentioned above, have put in place measures to protect their customers, including encryption technology and secure servers.
That said, it’s still important you do your due diligence and research the platform you want to use prior to using it. So many traders before have been fooled into investing in a platform, only for it to turn out to be a whole sham.
Remember, bonds won’t make you rich overnight, nor can they multiply your money tenfold in a month’s time (unless you go for premium bonds and get the lucky draw). If a trading platform promises you the world, and it sounds too good to be true, it probably is. You should avoid that platform altogether.
