Put simply, Bonds are a loan to a company or the Government.
The loan is agreed to be repaid at a future date and, until that date, the company or the Government pays interest usually at either a fixed rate or a rate linked to inflation.
Bonds can be bought and sold and their market prices change according to how attractive their interest rates are compared to other available interest rates.
This may sound complicated, but the Scheme's Bond funds make it easy to invest in Bonds, without you having to trawl the marketplace.
The Bond Funds are made up of many different bonds and, if you wish, you can buy units in the fund.
It is important to remember that the price of units can go up and down on a daily basis, depending on how the prices of the individual bonds change. However, over time, Bonds tend to increase in value at a rate that is slightly above inflation and cash, and price changes tend to be less volatile than with equities.
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