Gilts are used by the government to raise money from investors to fill the gap between revenue (taxes) and spending.

They are far more important to the financial system than any other asset.

MoneyWeek videos are designed to help our viewers become better investors.

They’re aimed at beginners and more experienced investors. In some videos, we explain investment concepts in an easy-to-understand way. In others, we focus on topical investment stories and themes.

Either way, the emphasis is on clarity and brevity. We don’t want to waste your time with a 20-minute video that could easily be so much shorter.

Read Money Morning, our free daily newsletter, for exclusive economic and market analysis, plus money-saving tips:

Signup to the MoneyWeek magazine:

MoneyWeek videos are made by MoneyWeek, the UK’s most popular financial magazine. Founded in 2000, MoneyWeek aims to provide intelligent and enjoyable commentary on the most important financial stories. It also tells you how to make money from the latest financial news….(read more)

LEARN MORE ABOUT: Treasury Inflation Protected Securities

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing

What is a gilt? – MoneyWeek Videos

Investing and managing personal finance can be quite overwhelming, especially when faced with various terminologies and investment options. One such term that often perplexes individuals is “gilt.” In this article, we will explore what a gilt is and why it is relevant to investors.

A gilt is a type of financial instrument issued by the UK government to borrow money from investors. These instruments are essentially bonds or loans that are backed by the government. The term “gilt” originated in the 19th century when bond certificates used to have gilded edges. Although this physical characteristic no longer exists, the name has stuck around.

Investing in gilts allows individuals to lend money to the government with the promise of earning regular interest payments over a fixed period. The government specifies an interest rate, known as the coupon, and the length of time until the bond matures. Generally, gilts have a maturity period of five, ten, or thirty years.

The appeal of gilts lies in their low-risk nature. As these bonds are backed by the government, they are considered to have a very low default risk. Additionally, gilts provide a stable income stream, making them attractive to investors looking for a safe long-term investment.

Gilts also offer a certain level of liquidity, meaning that they can be easily bought and sold in the market. This is particularly important for investors who may need to access their funds before the bond’s maturity.

Investors have various ways to invest in gilts. One option is to purchase individual gilts directly from the UK Debt Management Office (DMO). Another way is through investing in gilts indirectly via a fund or exchange-traded fund (ETF). These funds pool investors’ money together to buy a range of gilts, providing diversification within the investment.

When investing in gilts, it’s essential to be aware of the impact of interest rates on their value. As interest rates rise, the value of existing bonds tends to fall. This is because newer bonds with higher interest rates become more attractive to investors, reducing the demand for older bonds. Conversely, when interest rates decline, the value of existing bonds tends to rise.

Gilts can serve a variety of purposes within an investment portfolio. They can be used to generate stable income, provide diversification, or act as a hedge during times of market volatility. However, it’s important to note that they may not offer the same level of returns as riskier investments, such as stocks or corporate bonds.

In conclusion, gilts are a type of bond issued by the UK government to borrow money from investors. They offer the promise of regular interest payments and are considered a low-risk investment. Gilts provide stability, liquidity, and the opportunity for diversification within an investment portfolio. However, understanding the impact of interest rates on their value is crucial. Whether you are a conservative investor or seeking a safe haven for your funds, investing in gilts can be a viable option for managing your personal finance.