Pay attention. This is the last in our series on bonds, and we are looking at high-income bonds. Note the “high income” part of this bond’s name. Sounds tempting, and so it should as these schemes offer good returns.

But you have learnt that if it looks too good to be true it usually is, and the caveat to the high income is that your capital is linked to the stock market.

Know that high-income bonds are also known as precipice bonds. As in about to fall over the edge of a precipice.

If the indices or stocks take a hit, the value of your capital will too.

That’s a massive blow, particularly to retired people, who may not understand that their capital is at risks. As a result of adverts of double-figure returns, the Financial Services Authority is looking into allegations of mis-selling buy some firms.

Equity Income Funds

The last group are called equity income funds. As with corporate funds, investor put their money into not one but a group of companies, in this instance shares. A find manger will then try to make the fund profitable.

Equity income funds currently pay decent dividends. And, if at the risk of repeating ourselves, you invest the income in an Isa, you pay no tax.

If you haven’t got the message that you should own an Isa by now, you are not paying attention. Detention is too good for you. In fact, you deserve to pay taxes you need not and a whole deal more nastiness.

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