Government bonds might not be your first choice as far as investments go, but they can really help you when your portfolio is a bit narrow-structured. In this day and age, you cannot afford to have all your eggs in one basket, especially when we have already seen that all it takes is one good down-turn to wipe out a stock investment portfolio. Stocks are great, but their volatility makes them as dangerous as they are profitable. It does not take a lot to reduce your stock to a low enough level that you lose money on it. A portfolio needs diversity to protect itself from these threats, and government bonds and securities can build diversity without the risk of other stocks.

But to answer the question “why choose government bonds?”, we will look at one common denominator of all bonds - the fact that they pay a certain amount, and that they pose a certain amount of risk. First of all, government bonds pay a minimal amount, but it is the risk that makes them attractive to investors. These bonds are very safe, and are backed by the government. This basically means that you will be sure to get your money, because the government is not planning on going out of business anytime soon!

This is the reason that some finance companies will use government bonds as a means of calculating potential early repayment charges on equity release schemes. Security is important when considering longer term financial issues such as the repayment of a lifetime mortgage.

The duration of these plans can be some considerable time; hence by using instruments such as government bonds allows mortgage lenders to control future redemptions.

The limited amount of risk is probably the most attractive feature of government bonds. There are also choices like I-bonds and TIPS that offer protection against inflation by having fixed interest rates. In the case of I-bonds, half of the bond is fixed while the other half fluctuates, making it a very stable choice, even in un-stable times. Government notes, bonds, and securities have always been a trustworthy way to invest, and they continue to be such to this day.

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