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%.
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