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from your broker. For instant exposure to bond markets ETFs (exchange Traded Funds) provide low cost exposure to whole markets or sub-sets of bond markets. For a managed, diversified exposure use unit trusts etc. which have higher charges (typically above 1% annual charge) iShares issue a UK corporate bond-tracker EFT (symbol SLXX) which has very low charges and gives a good exposure to UK corporate bonds, although this does include a lot of financial industry bonds (banks etc.).

Government bonds pay out a defined sum every year (The "coupon") and a final sum on maturity on a predefined date. The income and final payment is predictable and governments of stable countries rarely default on their payments. Corporate bonds are similar and bond holders will always be paid first, before share-holders (but after any bank debt is paid), even if the company gets into financial trouble, but the health of a company's finances must always be taken into consideration.

Governments and corporate bonds are rated by rating agencies (Moody give ratings: Aaa to B3 and S&P and Fitch give AAA to CCC-) to indicate the chance of default. A bond rated at AAA or Aaa is extremely unlikely to default, AA/Aa1, A/A2, B/Ba2 or CCC/B3 are increasingly more likely to. Low rated bonds (rated Ba1 to B3 or BB+ to CCC-) are often called high-yield, Sub-investment grade or Junk bonds; the coupons are high to compensate for the chance of default. Higher rated bonds with low chance of default are called "investment grade bonds" (Aaa to Baa3 or AAA to BBB-) Corporate bonds, in general, pay a higher yield depending on the perceived quality of the company.

A simple rule of bond investment: When bank interest rates go down bond prices generally go up because the income from a bond is fixed so the income seems more attractive. How much the price goes up or down is determined by the "duration" of the bond. This is also a measure of risk of the bond; the longer the duration the riskier the bond.

Investing in individual corporate bonds is fairly risky in that the company could default or go bust, so a portfolio of bonds would help to reduce the risk or better still a managed bond fund (e.g. an exchange traded fund or ETF, mutal-fund, unit trust or OEIC) Unfortunately these do no have a defined end date, but they will have an average "duration" value published, just like any bond, which defines the weighted-average amount of time for the bond or fund's cash-flows to be received by the investor (i.e. how

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