Advantages of using bonds
Capital preservation
Non-complex bonds should repay principal at the maturity date (if the issuer does not default), unlike equities which depend on the share price fluctuation.
Non-complex bonds also have higher seniority than equities, as bondholders must be fully repaid before shareholders start receiving any money during a liquidation or bankruptcy process.
Steady income streams
Most of the bonds (especially fixed income bonds that are the dominant group) have a fixed schedule and amount of payments until their maturity.
Diversification and hedging benefits
Bonds have a low correlation with equities, this helps diversify your portfolio. During economic slowdowns, when equities underperform, bonds often outperform due to lower interest rates typically triggered by slow GDP growth.
For more information on the risks associated with financial instrument transactions, consult our Risk Disclosure.