Gilts
The government issues gilts (government gilt-edged bonds) when it wants to raise money. You can think of gilts as a loan to the government, which it promises to pay you back some time in the future and, while it has your money, it pays interest to you. You can also get corporate bonds which are the same idea, but are issued by companies.

Because the government backs them, gilts are more secure than corporate bonds issued by publicly owned companies. But this means the interest you get on gilts is likely to be less. As with shares, how much you pay for a gilt depends on supply and demand, ie how many people want to buy them and how many there are available to buy.

Corporate Bonds
Corporate bonds are similar to gilts, except they are loans made to companies not the government. They are more risky than gilts, and have different safety ratings (or levels of risk) depending on how safe the individual company is:

The poorer the safety rating of the company, the higher the level of risk you are taking - so the more chance there is of you losing some or all of your money
Generally, the higher the risk you take, the higher the rate of interest you receive

How do I make money?
Both gilts and corporate bonds pay an income, or yield, which is fixed when they are first issued. If you invest in a unit trust or other investment fund that in turn invests in gilts or corporate bonds, the income is usually reinvested. The value of the gilt or corporate bond can also rise and fall. You are only guaranteed to get the initial issue price back if you keep it until it matures.

For general information about tax on savings and investments visit our tax section. For specific information visit an Independent Financial Adviser (IFA). You'll find details of your local IFA in Yellow Pages (www.yell.co.uk), or visit www.unbiased.co.uk.

How much do I need to invest?
Usually you can invest from £1,000 or more in gilts, so it's best if you've got a lump sum. But you should speak to your stockbroker as sometimes you can invest smaller amounts. With corporate bonds you normally invest from £1,000 upwards, however you can invest smaller amounts, from around £50 a month, by buying corporate bonds through a unit trust.

Who offers these?

Gilts
There are two main ways to buy and sell gilts.

Through stockbrokers. Most people do it this way. You can find details of your nearest stockbroker in Yellow Pages (www.yell.co.uk), or visit www.find.co.uk.
Direct from the Bank of England Brokerage Service. You will have to pay for the service, but it's often cheaper than going through a stockbroker. Visit http://www.bankofengland.co.uk for more information.

Corporate bonds
Corporate bonds can be bought or sold on the stock market, so you buy and sell them just like shares: