Fund managers have raised concerns about investors' understanding - or lack of understanding - about yields on different types of bonds, along with changes soon to hit taxation of ISA investments.
Skipton Building Society says a survey of its Isa and Tessa customers has found wide variations in levels of understanding about the pending changes and how they could affect investment decisions.
Most worryingly, it found that 52% of its customers were completely unaware of the changes, such as the ending of the dividend tax credit.
ISIS Asset Management also says such uncertainty is likely to help sales of corporate bonds through this Isa season as investors continue to avoid risk associated with equities.
However, the danger is promises of high yields from bonds will also lead investors into areas of risk they are not prepared for.
There are marked differences between high and low-yield bond products, ISIS says, but it is questionable just how much retail investors understand these differences, particularly as the Investment Management Association’s bond sector puts quite different products under the same umbrella.
Investors chasing yield figures in the same way they might chase headline rates of interest paid on deposit accounts may also miss out on the fact annual management charges could be coming out of capital rather than income.
ISIS warns this could erode the invested capital over time.IFAonline
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