Are Government Bonds Worth Investing in?

Image courtesy of Steven Depolo
Image courtesy of Steven Depolo

It is always difficult knowing exactly where to put your money to keep it safe or to get a good return or both. This decision can be even harder when confidence in the economy is low for some reason. At the moment there is a lot of uncertainty with regards to money and the economy and it can be difficult to know where to put money. In this sort of time, many people turn to bonds but is it a wise idea?

Government bonds are one of the safest investments that you can make. This is because the money you save is spent by the government and they should be able to pay it back on the date of maturity. This is why many people turn to them as a really safe option.

The problem with government bonds is that the return is not that big. You will find that there are many other investments that will make a lot more money than the bonds do and this means that you may not even make back as much as inflation. This means that when you get the money back, it may not be able to buy you so much as when you invested it. Therefore it can be worth considering slightly riskier options which give a better return. Obviously you will need to do a price comparison and think about what risks you are prepared to take.

It may seem like you can either go for government bonds at low risk or anything else at high risk, but it is not as cut and dried as this. There are many savings and investment products available at different levels of risk. You will tend to find that the biggest return comes about as a result of taking the highest risks, but that isn’t always the case. It is worth comparing different products to see which look the best with regards to risk versus return.

It is also worth thinking hard about how much risk you are willing to take. Some people are much more likely to take risks than others, but some are happy to take some calculated risks, even if they normally do not like taking any risks. Consider how important it is for you to ensure that you get your investment back or whether you can get away with risking some of the money to get a better return. It really depends what you have earmarked the money for, it may be crucial for your retirement, children’s university fees, paying off a mortgage or something like that. However, it could be that you have some spare money, perhaps you have saved up or have had an inheritance and you do not need the money so much so you can risk it.

It is important to think things through really carefully as an investment should be a long term plan for the future and so if you think you might need the money within a few years, then it is better to put it in a savings account, which will not give such a good return, but which will be easily accessible and less likely to reduce significantly in value.

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Rachel Henderson is a professional freelance writer from the UK. She writes on many subjects but specialises in personal finance. As well as contributing to various blogs and websites she has her own website tracking her own money making process http://www.turnonepoundintoonemillion.com and sells her books through http://www.bowbridgepublishing.com.

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