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What are stocks?

Stocks is a term used to indicate the amount of money raised by a company through share sales. These shares are then traded, with the shareholders receiving benefits from the company, including profit dividends and rights of ownership.

I've heard people refer to stocks as gilts - what are they?

Gilts are government stocks, also known as government bonds, and are issued by the Government to help raise funds. More often than not they have a stated value of £100, and can be sold back to the Government at a predefined future date. When you invest in these bonds, you will receive interest which is always set at a fixed rate. The interest payments are made every six months.

Are gilts considered to be a safe investment?

Because gilts are Government-backed, they are considered to be relatively low-risk. If you do not trade in your gilts until the redemption date you will get a guaranteed return on your investment, and they are therefore a safe option if you use them in this way. However, as with any stock, the price of gilts can fluctuate. These price changes tend to be directly linked with adjustments to the current interest rate, or at least the adjustments people expect to be made to interest rates. When the rate is expected to rise, gilt prices fall; and when rates are expected to drop, prices increase.

Where can I buy gilts?

You can trade gilts in exactly the same way that you would with any form of investment, and this is usually done by paying commission to a stockbroker. Another option is to buy gilts directly from the Bank of England Brokerage Service, where commission is still charged but should be at a lower rate than through a broker.

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