Invesco Bond Income Plus: Investing for a regular long-term income

Reliable income matters more than ever

For today’s investor, rapid change and market ups and downs are par for the course. Therefore, any investment that might deliver a degree of certainty is an attractive proposition. For those seeking a stable income, the Invesco Bond Income Plus (BIPS) offers precisely this. BIPS enables investors to cut through all the confusion, offering a straightforward way to access income from the bond markets through a proven, disciplined strategy.

*Please read the Investment risks at the bottom of the page.

Bonds: a compelling income investment strategy

Bonds are a stalwart for investors seeking a regular and reliable stream of income. Indeed, this is why you might have heard of them being referred to as ‘fixed income’ or ‘fixed interest’. While the potential of a higher income comes with more risk than your standard savings account, bonds are generally considered to be less risky than investing in equities. Plus, bonds have often proven a source of stability for investment portfolios given they can bring great diversification benefits, especially when volatility is more prevalent in financial markets.

While bonds are suitable for any type of income investor, they tend to be particularly popular for pension investing. They are typically less volatile than equities and so suit investors who are approaching retirement, while equities might be deemed risky given that a sudden stock market fall could erode a significant chunk of a retirement pot. Bonds can also deliver a far more predictable income during the retirement years themselves. And given that bond prices can often move in the opposite direction to equities, they bring attractive diversification benefits for a more balanced investment portfolio at any stage of life.

What is a bond and how do bonds work?

Press headlines and financial jargon can make bonds sound more complicated than they actually are. Terms like “yields”, “ratings” or “duration” are often thrown around and might seem off-putting. But in actual fact, they are pretty straightforward.

By investing in a bond, you are effectively lending money to a government or a company. In return, that government/company pays you a regular income (known as interest), much like you pay interest on a mortgage or when you take out a loan. Also similar to other types of loan, all individual bond investments are over a set period. Once this period is up, the government/company then repays the original amount back to the investor.

The main risk of bond investing is that a government or company goes bust and is unable to repay the loan. As such, government bonds and bonds of well-known companies are generally deemed to be lower risk. Therefore, they pay lower income. Less-established smaller businesses typically involve more risk and thus pay higher income to attract investors. For example, a bond issued by the US government comes with minimal risk but is likely to pay a much lower income than a high yield bond issued by say a small technology firm.

As with any type of investing, holding a varied portfolio of bonds spreads the risk out, so the skill is in blending different bonds together to balance the risks with the potential rewards.

Invesco Bond Income Plus: A disciplined, diversified strategy

Even with the right knowledge, the time and effort involved in managing a portfolio of bonds would be an intimidating prospect to most people. BIPS is essentially an opportunity to outsource to a team of bond professionals, taking away the headache of having to decide which bonds to invest in yourself.

The premise is simple. We focus on investing in bonds that pay attractive income. We invest in a highly diversified portfolio of over 200 different holdings, mostly in companies you’re likely to have heard of. This high level of diversification means we can pay a regular quarterly income even when the markets get unpredictable, while at the same time significantly lowering the overall risk for our investors.* *Income not guaranteed.

Our experienced bond investment managers use a disciplined and rigorous approach to choosing where to invest. Their skill lies in blending the different types of bonds in order to pay a consistently high income without taking undue risks. They scrutinise each potential investment while looking at the finances of the company issuing the bond, its ability to honour its income obligations, and how a particular bond might compliment the rest of the portfolio.

Invesco Bond Income Plus is designed with stability in mind. The experienced team has a great view across the entire bond universe. Through a transparent, evidence-based process, the investment managers prioritise consistency. Using this approach, they’ve been able to deliver a sustainable income for over a decade – a period which has certainly brought its fair share of economic challenges.

The investment trust structure strengthens BIPS

An investment trust is different to traditional investments such as OEICs (open-ended investment companies) and unit trusts. As they are “closed-ended” – meaning there are a limited number of shares – they offer some advantages in the way we can invest. For one, our managers can take a longer-term view, because they are not compelled to sell investments to raise money when markets become challenging and unpredictable.

We’re also able to deliver a smoother, more consistent stream of income using some of the income we receive in the good times during the leaner times. In addition, investment trusts provide the added flexibility of being able to borrow (known as gearing). While this may introduce more short-term volatility, it means we can take better advantage of investment opportunities where we see the potential for long-term returns and attractive income. Finally, unlike other investment vehicles an investment trust is a company that is overseen by (and is accountable to) an independent Board of Directors. The benefit to our investors is that they can be sure the portfolio is being managed in their best interests as a shareholder.

In summary: a clear, dependable route to bond income

Our experienced investment managers employ an extremely disciplined approach, with the main objective of capital growth and paying a high, reliable income – by investing mainly in bonds which pay higher interest. In addition, the large portfolio of bonds brings the benefits of diversity to any investment portfolio. And, given the changing pensions landscape, BIPS may provide a good solution to the requirement for income in retirement, sparing investors the need to navigate the bond markets themselves. Invesco Bond Income Plus – an income you can set your clock by.

Invesco Bond Income Plus – an income you can set your clock by.