What are Bonds?
Well, they’re effectively like a mortgage – but the other way around… Richard Knight, an Authorised Financial Adviser, joins me in this discussion.
To learn more about bonds from the FMA’s perspective – click on this link
Check out this info here from Sorted around bonds also
So, what are bonds?
Aka ‘Fixed interest’ – are one of the 4 main asset classes that the everyday investor will typically participate in: Cash, property and shares being the other three.
With many KiwiSaver funds, you’ll already be invested in bonds through your fund manager – but what are these funny little things anyway, and what role do they play in generating long term returns?
In a well constructed portfolio, or set of investments comprising of the four main asset classes (cash, fixed interest (bonds), property, and shares), bonds can help provide diversification in that they move in somewhat of an opposite direction to shares. During seasons when shares may decrease, the value of bonds may increase. The more bonds you hold in your portfolio, the more muted your returns are in good times, but in volatile times, bonds can cushion the blow somewhat.
My special guest today is Richard Knight, an authorised financial adviser with Rutherford Rede based here in Auckland New Zealand .
As with everything covered in these shows, there’s an element of risk associated with holding any asset. Specifically that what you invest in may not yield a positive outcome – with bonds this could be in the form of higher than expected inflation, credit risk, or unexpected changes in interest rates. It’s important to do your own due diligence and engage the services of an AFA to help with designing your own investment portfolio.
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