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Investment Bonds and Rates of Return

An investment bond is a lump sum investment vehicle that is designed to be held over the medium to long term, usually for at least five years. They can be used to provide an income and incorporate a small amount of life cover.

Different types of investment bonds are available on the market and the level of risk involved will vary depending on the type of bond selected and the fund into which you invest. Typically, an investment bond invests in the stock market and therefore investment bonds' rates of return are difficult to predict.

Unless there is a some form of guarantee attached to the investment bond, it is possible that you might not get back the amount you invest. However, in return for this risk the levels of return possible if the investment performs well are usually higher than for a lower risk product.

Itis important to make sure you fully understand both the risks and possible returns of an investment bond before investing. Some investment bonds are designed in such a way that although they can offer excellent returns, your capital might be subject to significant losses if certain growth criteria are not met.

An investment bond will also be subject to charges that can affect the rate of return you receive from your investment. If you decide to cash-in your investment during the first five years, there might be an additional charge for doing so. Make sure you are aware of all of these charges before investing, that you are happy with the level of charges and aware of their impact on the investment returns.

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