![]() ![]() ![]() ![]() Bonds can be traded in the secondary markets.Between the issue date and the maturity date, the bond investor typically receives regular interest payments.Bonds are a type of debt instrument where the bond investor (lender) lends money to the bond issuer (the borrower).This means investors can sell their bonds to another investor before the maturity date. Such protection is not available to equity holders who have a residual claim on the lender’s net assets.īonds are tradeable, and many bonds can be traded in the secondary markets. They are essentially “creditors” and have protection from such events. In comparison, payments to equity holders vary based on the performance of the stock (usually in the form of dividends).Īnother key difference between bondholders and equity holders is that bondholders enjoy a priority claim in the event of bankruptcy. This comes with a risk that the issuer will not repay the debt (known as default risk).īonds are fixed-income instruments where all payments to bondholders are predefined. Between the issue date and the maturity date, the bond investor typically receives regular interest payments. The bond investor (lender) lends money to the bond issuer (the borrower) with the promise to repay the amount at a specific date in the future, called the maturity date. In October 2020, the FCA has banned the sale of derivatives and exchange-traded notes (ETNs) that reference certain types of cryptoassets to retail consumers.Ĭryptoassets – like Bitcoins and other digital currencies – are not protected by FSCS.Bonds in finance are a type of debt instrument issued to raise capital. Cryptoassets, crypto coins and cryptocurrency Research the business’ reports and accountsįind out more about how to avoid investment scams on the FCA’s ScamSmart page.they’re not really profits at all.īefore you invest, be aware of the following: However, often this ‘profit’ is actually just money from other investors – i.e. One example is a Ponzi scheme. Ponzi schemes nearly always offer a healthy profit. While mini-bonds can be a legitimate way for a business to raise money, there are also many scams associated with this kind of investment. So, if the mini-bond issuer fails, you could lose all your money. If you’ve invested in mini-bonds, it’s unlikely we can compensate you for any losses. It's generally a bad idea to invest more than 10% of your net wealth in mini-bondsįor more information on mini-bonds, we recommend reading the FCA’s mini-bonds page.Don’t invest money that you might need before the investment term is over.Don’t invest money you can’t afford to lose.Some mini-bonds will be riskier than others.Especially if you’re not sure about what you’re investing in. If you are thinking about investing in mini-bonds, it’s a good idea to first get professional financial advice. Mini-bonds can often be marketed to seem like safe/deposit-style products, simply offering better returns than conventional savings products. Mini-bonds can be very attractive, seeing as banks and building societies offer low interest rates. However, we do protect ‘ investment services’ provided by firms in relation to mini-bonds.įor example, if an authorised company gives investment advice about mini-bonds, then it must make sure the advice is suitable and in-line with FCA regulations.īut if you’ve invested in mini-bonds, and the mini-bond issuer fails, it's unlikely we can compensate you for any losses.Ĭustomers buying mini-bonds often come across sales tactics like these: Businesses don't have to be regulated by the FCA to issue mini-bonds. In general, mini-bonds aren’t protected by FSCS or FCA. In summary: you invest in mini-bonds at your own risk. You are usually locked in until the bond ‘matures’, and so won’t be able to exit your investment early. Mini-bonds usually cannot be sold on (unlike with shares or bonds of larger companies). If the issuer’s business fails, you could lose your investment. This type of company could face cash flow problems that delay interest payments. It could also fail altogether and be unable to repay any of the money investors have lent it. ![]() Companies that find it difficult to raise funds from institutional investors, or loans from banks.The reason for the high risk/reward is because mini-bonds are usually issued by: Mini-bonds tend to carry higher risks, but also offer higher rewards. In exchange, you receive a fixed rate of interest over a set period. At the end of this period, the issuer should repay the money from the mini-bond back to you. There is no legal definition of a ‘mini-bond’, but the term usually refers to a type of investment product. It is essentially a kind of loan you give to an investment company (the issuer).įor example, you (the investor) buy a mini-bond from the investment company (the issuer). ![]()
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