Commenting in The Scotsman’s article on the 3rd August about the FCA‘s statement outlining the risks of funds in relation to corporate bonds, John Bell advises caution and a greater level of understanding before investing.
The FCA has concerns that corporate bond funds are wrongly perceived by many people as risk-free, this is a concern shared by Carbon Financial Partners’ financial planner, John Bell.
John believes many investors are lulled into a false sense of security by the low-risk ratings assigned to corporate bond funds by many credit agencies. John rightly highlights that the term ‘low-risk’ is relative and it may not be clear to many that there are other lower risk alternatives when investing.
The FCA statement warned there may be liquidity issues and the possibility that fund managers could struggle to sell sufficient bond holdings to meet investment redemptions orders. They are also keen to make investors aware that interest rates could have an impact on bond values, and an increase by the Bank of England would push bond prices down.
John’s overall advice is to gain a greater understanding of what’s ‘under the bonnet’ with these investment opportunities and states his preference for investment in short-dated, high quality bonds issued by governments and central banks.
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Read the statement from the FCA here