Bonds trading is a growing asset class, and it’s one that individual investors can make an active effort to build a portfolio around. Some people think of bonds as the boring older brother of stocks, but this couldn’t be further from the truth since they’re incredibly dynamic and exciting investments. In this guide, we’ll take you through every step in building a solid bonds trading portfolio from scratch.

Before starting, there are some essential things to note about investing in bonds.

  • Firstly, if you want quicker growth, then bonds will not offer it by their nature. Rather than see constant stock market rises or falls over time, bonds are more likely to move up and down in line with interest rates.
  • Bonds trading is relatively illiquid, meaning once you’ve sold a bond, it could take weeks or months before the cash is available for withdrawal. If you’re investing, your profits must be locked away for that period, which some people aren’t comfortable with.
  • Risk needs to be taken into consideration. Bonds are still subject to credit risk, meaning they can default if the organisation issuing them goes bust, resulting in repayments being missed or not handed back at all.

So How Can You Put Together a Great Portfolio?


Two of the most popular indices for bonds are the Barclays Global Aggregate Index and the Citigroup World Government Bond Index. They track over 22,000 and 35,000 different bonds respectively worldwide, so even these huge indexes don’t quite show you everything around. However, they offer a good starting point by giving you an overview of this asset class’s general risk/return.

Take It Slowly

Please don’t rush into buying any old bond because it carries some investment-grade credit ratings or higher or because it’s part of one of those indices. Instead, take your time to find out where your money will be best invested. You can learn this here. Your broker can help with this since it’s their job but remember to do the background research yourself.


If you’re new to this, then the last thing you’ll want is for all your eggs to be in one basket with a single bond that could suddenly go bust or lose its value. Instead, make sure you spread your investments across different issuers and credit ratings, preferably evenly distributed.

Currency Risk

Bonds can be issued in any number of currencies, which often leads investors to decide where they’ll buy based purely on whether it’s in pounds, euros, dollars, etc. If you want simplicity, stick with UK-based bonds that are risk-free since the value of the currency is never called into question. However, if you want higher returns, then why not look overseas for some extra potential gains?

Shop Around

When it comes to buying a bond itself, don’t settle for the first quote given by your broker. Instead, always shop around since you could get a better price elsewhere, even if your broker is offering what seems like a great deal at first. If the difference in rates is negligible, then it might not be worth fighting for, but anything higher than 1% off, then it’s almost certainly worth trying another broker before making your move.

Look For the Best Price

Just because you have to pay market rates to sell your bond doesn’t mean that this is the only fee involved, so don’t assume it won’t cost anything extra. Make sure any quotes you are given are all-inclusive with no hidden charges, especially if there isn’t much difference between them in the first place. Even small fees can make quite an impact on overall returns, so make sure you don’t skimp on this.

Read the Small Print

Lastly, make sure you’ve read and understood all terms and conditions related to your investment. This is important since it outlines whether you can sell early or what level of flexibility there is in choosing when to cash out. If your broker doesn’t let you access these documents without agreeing to their terms first, then walk away.