MORE FIXED INTEREST FUNDS

Two trusts from Henderson complete our portfolio of investment trusts for the long-term investor. The Henderson High Income Trust is 25% invested in fixed interest bonds and the like. Its NAV has been rising faster than its share price, which means it is currently on a discount. Its yield is 7.3% which is excellent. It consistently outperforms its competitors. The second trust is also from Henderson -  Henderson Diversified Income Ltd which is entirely devoted to bonds and secure loans, with only 14% in "junk" bonds and another excellent dividend of 7%, though it's TER is high at 1.43%.

The trust's co-manager, Jemma Bernard, confided to the last seminar that she aims for "consistently high income, capital preservation over all periods and the prospect of capital growth over the long term." This fund has also been increasing its value faster than its share price, and is on a discount. A sound buy for income, which should stay steady whatever the ups and downs of the market.

The next seminar will pull together the trusts reviewed over recent months, and ask: "Is this the time to buy?"

Step-by-step guide to investing: Seminar 15

Bonds are less risky and volatile than shares, we are always told, and come what may they will react differently; bonds tending to move up when shares tend to move down. Moneybox Man is not convinced. The bond world is distorted by the Bank of England's printing of £200 billion and could do funny things.

Certainly, if you buy National Savings products then your money will be safe. But will it actually earn anything for you? Will it give a return that's better than inflation, even? If you buy monthly income bonds and put in more than £25,000, you will get a magnificent 2%!! Hurrah, when inflation has just reached 3%!! And you will be taxed.

Index-linked bonds give you 1% tax free, which is at least something if you are a high rate taxpayer, but really tax ought to be avoided whatever you do. 

The price of total security is too high; the "total security" itself too notional. There are better things a prudent and sensible investor can do with their money.

Take, for example, the Invesco Leveraged High Yield Income Trust. Dripping with danger, you might think - leveraged, which means they're borrowing money to invest with; high yield meaning they're putting the money into bonds with a low rating - BBs and CCs rather than straight As! (See last posting).

But the managers are the redoubtable Paul Read and Paul Causer. They run the Invesco Perpetual Monthly Income Plus fund. Moneybox Man has shares in Monthly Income Plus, and is very satisfied. They pay 7.38%, tax-free in an ISA. They have risen in value by 36% since Moneybox Man bought them in 2002.

Read and Causer put your money to work. The Invesco Leveraged High Income Trust pays over 9%, has a TER of 1.4, and is at a discount of around 6%.

I missed the seminar because of the snow, and now I don't understand about gilts and junk bonds. What am I going to do, Moneybox Man? And how will I get to next week's seminar? Miss Muddled, Middlesex
Don't worry, Miss Muddled Middlesex. You can come to the next seminar with Alastair, who has been given the use of a helicopter of the Queen's Flight as part of his price for supporting Gordon Brown. As for bonds and gilts as such like, you need to know only the following.

• A bond is simply lending £5,000 or whatever to somebody, and they promise to pay you the money back in a fixed time, say five years, together with a fixed rate in interest per year. To confuse people they call the dividend the "coupon"
• A bond is called a gilt when it's a loan to the government. In the old days these bonds had gilt edges. They can't physically put gilt edges on them now because Gordon Brown sold all our gold reserves at the lowest price that gold reached in the last decade.
• Junk bonds are loans to companies that are not perceived as being totally secure financially. Instead of having an AAA rating they might only have a BBB. These companies have to pay a higher rate of interest to get your money.
• Note that if the United Kingdom loses its AAA rating in the next few months, because the Bank of England is printing all that money, then gilts will have become junk bonds, and the world will have turned over and the stars will fall from the skies.

See you next week in the Bonnie Prince Charlie function room, Miss Muddled!

A CARTOON FOR THE WEEKEND

The putsch is over - Hoon executed on College Green, Hewitt in hiding, six cabinet ministers still under interrogation.  The prime minister now walks Alastair Darling's little Scottie dog at nights, part of the price he has paid to retain the chancellor's dubious loyalty. Passing the Embankment paper-recycling bin he empties his briefcase into the fourth slot.

On Monday the Moneybox Man seminar will meet to consider where money can best be kept in banks and bonds.

Step-by-step guide to investing: seminar 14

Unlike the friendly but totally useless sloth,  South American markets promise to be industrious, vibrant, and dynamic in the next decade. This should prove rewarding for the awesome Templeton Emerging Markets Trust, managed by the fabled Dr Mark Mobius and his team of 35 portfolio managers round the world, who speak 22 languages and dialects between them.

The trust - known as TEMIT - is on a discount to NAV of around 7%, and although it's very much a long-term growth trust, it does pay a modest 1.3% annual dividend. Moneybox Man is hooked on yield, and feels physical pain at the thought of buying a trust yielding less than 4% - but in the case of TEMIT and Sue Rippingall's Scottish Oriental he is very much a buyer.