Government bonds are essentially financial instruments which are sold by a government to other people/countries.
Essentially, they provide the government with a way to borrow money from the people, which in turn offers them a virtually secure investment opportunity with a guaranteed return.
Throughout the world, government bonds are issued when the various governments need to raise money.
In the UK - the government issues special 'gilts' for set amounts which can be bought by anyone.
After a period of years, these government bonds mature at a set rate, and once they have 'matured' i.
e.
reached their expiry date, the government buys them back.
For many, the great thing is that they really are virtually no risk, because they are backed by the government, so it's unlikely that they'll be defaulted upon, in the worst case scenario - governments will simply raise taxes in order to pay back the government bond.
As a result, while interest rates aren't fantastic compared to other forms of investment, it's seen by many to be highly secure.
Today, there are many ways to buy government bonds.
The government may sell them directly through a broker, or alternatively bonds can be put up for auction and bought part-way through the bond's lifetime - creating a way for people to sell them early and get their money back.
The good news is with a government bond, you're always guaranteed to get at least your money back, even if you auction it early.
Often, they are used in tandem with other forms of investment due to the fact they offer relatively little risk; in fact the main risks are for those who buy bonds of a different country as over time foreign exchange rates, meaning that over the bond's life - it might become worth more or less than what it should be worth upon maturity.
When looking at what they are and where to get them, it's possible for just about anyone to purchase and acquire them, although in many cases, they have to be purchased through a broker.
For many countries, there is a minimum value on a government bond, for example in the USA it is $1,000 and in the UK it is £100 pounds.
In some countries such as the UK index linked bonds are proving popular due to the fact they offer more risk/reward than traditional bonds, however this does present a degree of risk due to the fact that the bonds are linked to the retail profit index.
When times are bad, obviously the value of the bond decreases.
Today, many argue that government bonds are in fact a bad investment due to the recent financial crisis of 2008 and 2009.
However, what are government bonds for? They are financial instruments that allow people to essentially help the government out.
For this reason alone, they are still a valuable investment choice because government bonds will always be paid back at maturity.
While low interest rates might mean there's not much profit in the bond, it's going to be worth at least its face value.
Essentially, they provide the government with a way to borrow money from the people, which in turn offers them a virtually secure investment opportunity with a guaranteed return.
Throughout the world, government bonds are issued when the various governments need to raise money.
In the UK - the government issues special 'gilts' for set amounts which can be bought by anyone.
After a period of years, these government bonds mature at a set rate, and once they have 'matured' i.
e.
reached their expiry date, the government buys them back.
For many, the great thing is that they really are virtually no risk, because they are backed by the government, so it's unlikely that they'll be defaulted upon, in the worst case scenario - governments will simply raise taxes in order to pay back the government bond.
As a result, while interest rates aren't fantastic compared to other forms of investment, it's seen by many to be highly secure.
Today, there are many ways to buy government bonds.
The government may sell them directly through a broker, or alternatively bonds can be put up for auction and bought part-way through the bond's lifetime - creating a way for people to sell them early and get their money back.
The good news is with a government bond, you're always guaranteed to get at least your money back, even if you auction it early.
Often, they are used in tandem with other forms of investment due to the fact they offer relatively little risk; in fact the main risks are for those who buy bonds of a different country as over time foreign exchange rates, meaning that over the bond's life - it might become worth more or less than what it should be worth upon maturity.
When looking at what they are and where to get them, it's possible for just about anyone to purchase and acquire them, although in many cases, they have to be purchased through a broker.
For many countries, there is a minimum value on a government bond, for example in the USA it is $1,000 and in the UK it is £100 pounds.
In some countries such as the UK index linked bonds are proving popular due to the fact they offer more risk/reward than traditional bonds, however this does present a degree of risk due to the fact that the bonds are linked to the retail profit index.
When times are bad, obviously the value of the bond decreases.
Today, many argue that government bonds are in fact a bad investment due to the recent financial crisis of 2008 and 2009.
However, what are government bonds for? They are financial instruments that allow people to essentially help the government out.
For this reason alone, they are still a valuable investment choice because government bonds will always be paid back at maturity.
While low interest rates might mean there's not much profit in the bond, it's going to be worth at least its face value.
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