The Wise Investor
5.1 Interest-bearing investments
John sat on the park bench in stony silence.
Autumn had long since passed, and winter had fallen on
the park. Snow fell softly, and Kate pulled her coat tightly
around her to keep out the cold.
Although the air was very cold now, Kate and John
continued to meet in the park. Winter brought its own
character to the park, and small animals scurried through the
snow around the edge of the lake.
Eventually John spoke. His voice was very quiet now,
and Kate worried that their discussions were talking a heavy
toll on her grandfather.
"Kate," John said at length, "we have finally come the
point of discussing specific investments.
First we have the interest-bearing investments. These are
the most familiar investments to many of us, and the simplest
to understand. There are a great variety of interest-bearing
investments to choose from, but they are all essentially the
You are simply loaning your money to a person or
organisation, and receiving interest for doing so. Most of the
money invested on an interest-bearing basis is done for a
fixed term and at a fixed interest rate.
This includes examples like a two-year term deposit with
a bank, or a three-year government bond. This sector is
often called the 'fixed-interest' sector, rather than the more
general name of the 'interest-bearing' sector.
Fixed term investments fall into two categories. Firstly,
there are the 'non-tradeable' deposits like bank term