How to Invest Bonds - part 2

Sensible Investments with Dr John

Dominic here and it’s my pleasure to welcome back Dr John Wolstencroft who, over two parts, is looking at how to invest in bonds. Last week he covered the low-risk end of the market. Today in part 2 he considers the racier end of the market.

Last time we looked at the safe end of debt where one can buy bonds from (lend money to) governments and quality companies. But even smaller companies often need to borrow money and this can be a very interesting part of the debt markets.

We saw how the price of debt (when bought and sold on a market) can vary, as perception of the borrower changes or as interest rates change. Low-quality companies where the financial strength of the company might change at short notice issue junk debt because the risk of them defaulting is perceived to be high. Don’t let this derogatory term necessarily put you off. 

Individual Corporate Bonds