When economic challenges arise, it can be difficult to know what to do with your money.
While most would avoid shoving notes under the mattress, finding the best approach for growing wealth involves a continual effort to monitor for the best options available.
One often overlooked option is gilts and their recent time in the sun brought about by crossing the 5 per cent threshold could make them a viable saving strategy.
Are gilts a good investment?
Gilts are bonds issued by the UK Government and their existence is based on an arrangement where private citizens lend money to the Government and receive a return on investment as compensation.
While you own the gilt, you will receive a coupon, which is a fixed interest payment issued twice a year.
Once the contract term ends, your original investment is returned to you.
When are gilts a viable saving strategy?
Gilts are low-risk ways of generating revenue and acquiring a predictable income but are likely ill-suited for those aiming for high or long-term growth.
They can work relatively well as part of a wider saving strategy, particularly for absorbing funds left over once more effective options have been exhausted.
This means that many savers turn to gilts once they have maximised ISAs for the year, as buying gilts is better than leaving money in a bank account where the Personal Savings Allowance limits the level of growth attainable before tax kicks in.
Gilts become more attractive when the Government engages in more borrowing, as this raises the percentage return on investment.
However, inflation rates can erode the value of gilts as higher interest rates make gilts less viable.
It would be unlikely for gilts to be the main focus of your saving strategy, but they are a valid option for someone seeking to diversify a portfolio.
Seeking specialist support is vital when determining the right saving strategy for your unique circumstances.
Get in touch with our team for tailored advice on effective saving strategies.
