Defensive investors and retirees always like to invest in bonds amid low risk. These investors seek to receive returns that should stay relatively close to returns from volatile stock and forex markets.
Though stock and forex markets offer higher returns for high-risk tolerance investors, the return from investment in the fixed rate bonds should stand at least higher than the inflation numbers. This strategy permits defensive investors and retirees to beat inflation and save their money from depreciation.
Keeping an eye on inflation number is significantly important when you plan to invest money for more than one year. The majority of fixed-rate bonds are generally offered for one year to ten years.
You can use our guide to compare the best fixed-rate bond providers.
Inflation in the United Kingdom stands around just below 1.9 percent at present after hovering above 2% in the last year. However, market participants are expecting inflation to stand around 2% in the coming months amid rising fuel prices.
With an expected increase in inflation, analysts suggest defensive investors and retirees lock their money for short-time in bonds that offer higher returns than the growth in inflation.
Fortunately, several challenger banks have now started offering the best rates to investors on fixed-rate bonds that last less than two years.
For instance, the challenger bank Atom offers new one year fixed bond at 2.03% AER. The bank permits to open an account with just £50. The bank has increased the rate on its two years fixed bond to 2.30%.
Though the minimum deposit requirement at BLME and Al Rayan are higher, they also offer a higher rate on one year fixed rate bond. BLME offers 2.20% AER and Al Rayan provides 2.17% AER. Below is the list of few banks that offer returns higher than the growth in inflation numbers:
|Account||AER||Minimum initial deposit|
|My Community Bank||2.05%||£1,000|
|United Trust Bank||2%||£5,000|