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Corporate bonds offer an investment option that is suitable for saving; the fairly low risk involved in this kind of investment means that these bonds, while speculative, can be viewed as a medium term option for promoting growth in a lump sum.

Corporate bonds are similar to government bonds, in that they are issued by the company to raise money - buying a corporate bond is effectively a way of loaning the company money. In return for this loan, an interest rate is set in advance - corporate bonds are sometimes known as fixed interest securities. This interest is paid at regular intervals, such as monthly or annually, and at the end of the fixed period, the initial capital invested will be paid back - if everything goes to plan.

However, corporate bonds are traded on the stock market, and so herein lies the potential risk that the value of the bonds can fall, as well as rise, as the value of the bonds is subject to trading activity. Largely, this trading activity will be a reflection of the overall value of the company; as determined by internal performance, as well as external factors like the fortunes of rivals in the sector.

The target rate of return, as well as the period of the investment, will vary between different corporate bond investment products, with the target rate largely affected by the risk involved. Higher risk portfolios will of course be rewarded with higher potential returns. If you are keen to expose yourself to only the lowest investment risk, government bonds generally provide a low return but low risk investment option, as both local and national government bodies are not subject to the same market competition - and therefore potential for aggressive stock market trading - as companies issuing corporate bonds.

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