Investment Bonds: A Safe Haven for Your Money

If you are looking for an alternative to conventional deposits that offers attractive interest payments and portfolio diversification, then bonds should be on your radar. Bonds are what's called 'Fixed Income securities' and are ideal for those who want regular income and capital appreciation.

Know what are Investment Bonds

They are types of debt issued by companies (corporate bonds), governments (treasury bonds), and utility providers (such as DEWA) for raising long-term finance, to fund projects, for operations or expansion on a fixed cost basis. It could also be Junk bonds i.e. the debts of companies in financial difficulties.

Key Terms Related to Investment Bonds

It is important to know a few key terms. When you buy a bond, you are loaning money for a period to the issuer. In exchange, the borrower promises to pay (IOU) interest and return the principal at "maturity", when the loan comes due, in the future or at "call" if the bond permits that. The length of time to maturity is called the "term." A bond's face value, or price at issue, is known as its "par value." Each bond issued has a fixed interest payment rate known as a "coupon". It is paid at regular intervals over a tenure from 1 month to 30 years based on the bond. Upon maturity, the issuer repays the 'face value' of the security in full along with any outstanding coupon payments.

Based on the type of bond, interest is paid monthly, quarterly or annually. The interest rate (or coupon) is a percentage of the face value. The maturity date is the date in the future on which the investor's principal will be repaid and can range from one day to 30 years or more.

Do note, the bond-holder does not share actual profits or ownership, as it's not shares/equity you are purchasing.

Citibank offers a wide range of international bonds designed to meet the needs of high-net-worth individuals (HNWIs), with options from across the US, Eurozone, Middle East, and Asia, issued by reputable organizations and available in various currencies and sectors.

Types of Investment Bonds

You can opt for an investment on basis of the types of bonds mentioned below:

• Fixed Rate Bonds: Pay the same interest throughout their tenure.
• Floating Rate Bonds: Interest adjusts based on a market index.
• Zero-Coupon Bonds: Issued at a discount and redeemed at face value without regular interest.

Bond pricing is influenced by credit ratings (by agencies like Moody’s or S&P). Ratings range from AAA (highest investment grade) to D (default). Higher-rated bonds are considered safer but offer lower yields.

Benefits of Investing in Bonds

Investing in bonds can be play a pivotal role in your financial planning. Let’s see how you can benefit from these investments:

Investment Bonds that are good for diversification

Historically, large stocks have returned an average of around 10% per year; long-term government bonds have returned between 5% and 6%, according to investment researcher Morningstar. True, stocks have returned more than bonds, but they are also more volatile. Even with short and medium-dated bonds, the risk is lower than that of equities (stocks). Thus, bonds are generally viewed as safer investments than stocks. Combining stocks with bonds is recommended for a more stable portfolio, and for Citigold Private Clients, curated bond options are available to meet the needs of high-net-worth individuals seeking balanced growth and stability.

Bonds Provide a steady Income

Bonds provide a worry-free stream of income and are among the most valuable tools in your investment kit. Because they pay interest regularly, they are a good choice for investors—such as retirees—who prefer a steady stream of income. Short-term bonds are good to buy a house or send a child to university that you have planned in the coming years.

Investment Bonds based on your risk appetite

If your objective is to achieve capital gains, concentrate on longer-term bonds. When interest rates fall, long-term bonds—especially zero-coupon bonds—can suddenly become worth a lot more. On the flip side, it is a disadvantage if interest rates rise; your portfolio may drop in value. If your objective is a steady, secure stream of income, stick to shorter-term bonds. Even 1–10 year maturity bonds yield more than shorter-term bonds, and are less volatile than longer-term issues. A bond that matures in one year is more predictable and less risky than a bond that matures in 20 years. In general, the longer you keep your bonds, the higher the annual returns.

Investment Bonds offer flexibility

Previously issued bonds can subsequently be sold (traded) to other investors during their lifetime in a 'secondary market'. This gives the flexibility to adjust if your view of interest rates changes. You could say bonds have an easy resale value. As a thumb rule, when interest rates fall, bond prices rise. A fixed time deposit does not offer this opportunity.

Remember, the interest payments you will get from owning a bond are "fixed"; your return is not necessarily so. You must consider possible risks related to inflation, changing interest rates, price fluctuations, changes in the credit ratings of the bond, liquidity, and market risk. You cannot eliminate risks, but you can reduce their impact.

For qualifying clients in the UAE, Citigold Private Client offers exclusive access to select primary market bond offerings, supported by a dedicated relationship manager and advisory team who can help structure and manage bond investments to match individual risk appetite, long-term goals, and market opportunities.

Exclusive Market Access

For qualifying clients in the UAE, Citigold Private Client offers the chance to join select primary market bond offerings that are special investment deals that are not open to everyone. This means clients can buy bonds right when they are first issued, often with better terms or priority access, before they are sold in the wider market. This early access can help high-net-worth individuals find quality bonds from around the world, earn strong returns, and add rare bonds to their portfolios.

Clients also get help from a dedicated relationship manager and an expert advisory team. They guide you in choosing bonds that fit your goals, explain market changes, and build a balanced mix of investments that aims to grow steadily while keeping risks low.

Smart Investing: Top Tips for Buying Investment Bonds

• Look at the 'total return' as that is what matters. This includes all the money you earn off the bond: the annual interest and the gain/loss in market value, if any.
• Invest in a variety of bonds with different maturities, either by buying a bond fund or many individual bonds to create a 'laddered portfolio'.

Final Word

Investment bonds are a smart way to grow your money and keep it safe. They provide regular income, protect your savings, and help balance your investment plan. You can use them to save for a big goal or enjoy steady returns. Bonds come in many types, so you can choose based on your risk comfort. Citibank offers a wide range of global bonds with expert guidance. As a Citigold Private Client, you also get exclusive benefits — such as access to select primary market bond offerings and advice from a dedicated relationship manager. Getting started is simple, and you’ll have the support you need to make confident investment decisions.