Bonds vs shares – what’s the difference and how do they work?

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Archived article Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing, however, it may no longer reflect our views on this topic.

Looking to invest in bonds? Here’s a closer look at how bonds work, how they compare to investing in shares and how to get started.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

29 June 2023

Bonds and shares are some of the most traded types of investment. With stubborn inflation and the highest interest rates for 15 years, bonds have re-emerged into the spotlight with yields in focus.

But, what’s the difference between bonds and shares?

This article isn’t personal advice, if you’re not sure whether an investment is right for you, ask for financial advice.

All investments, including any income from them, can fall as well as rise in value, so you could get back less than you invest. Yields are variable and not a guarantee of future income.

A bond is a fixed-income investment where investors lend money to governments or companies for a set period in return for regular interest payments.

In return for the loan, the borrower will agree to pay