Check out with-profits, too

IT HAS been a good week for shares. Most investors have see the value of portfolios grow as the FTSE-100 index of the UK's top companies rose to record levels.

For investors in both distribution and with-profits bonds, the picture has been the same. Although the overall equity weighting of either bond means that gains are not as substantial as a shares-only fund, they too have shared in the bonanza.

What are the main differences are between distribution and with-profits bonds? Charles Timm, managing director at The With-Profits Shop, says: "There are similarities between the two products. But also several differences. Some distribution bonds will have a higher proportion of their funds invested in index-linked gilts.

"Unlike distribution bonds, with-profits bonds attach a bonus every year which canot be taken away. Depending on your attitude to risk, with-profits bonds will deliver safer returns.

"Distribution bond pay income out of dividends. You may have to accept a lower income at first. Growth in income will hopefully come from growth in the value of the fund overall."

What makes distribution and with-profits bonds attractive is the way investment is spread between different classes of assets. Nervous savers who want some of that upside with less of the risk could do worse than consider one of both forms of investment.

The ISA Shop, a firm of discount brokers, is about to publish a guide to distribution bonds. To reserve your copy, free to Independent readers, call 01777 839205.

The Independent has produced a free 24-page Guide to With-Profits Bonds. Written by Nic Cicutti, the paper's personal finance editor, the guide examines the arguments for and against bonds and where to buy them. For your copy, sponsored by The With-Profits Bond Shop, call 0845 2711007. Or watch out for the coupon on page 4.

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