LESSON 6.1 · CORE

What a bond actually is

You're the lender, not the owner. Everything else follows from that.

BEYOND EQUITIES4 MIN READ

A bond is a loan you make to a government or a company. A gilt is a bond issued by the UK government. In return the borrower pays interest, the coupon — for gilts, twice a year — and repays the par value, usually £100 per bond, on a fixed date: its maturity.

Being the lender changes everything. You don't share in the borrower's profits: the coupon is the same in a great year as in a poor one, and the most you'll get back at maturity is par. What you get in exchange is priority, because lenders are paid before shareholders. The app can't track individual gilts or bonds, because its data provider doesn't list them, but gilt and bond funds trade like any fund and can be added as holdings.

Lend £100A coupon every six months£100 back at maturity

You're owed interest and your money back. You don't own any of the business.

Add a bond fund to your portfolio →

Educational content only. It is not personal financial advice.