Many, if not all of you, will have investments in corporate bonds. A corporate bond effectively is a loan to a company for a fixed period of time. With most bonds you never see them openly, because they are for sizeable amounts and are sold directly to the large institutions.

However, in a departure from this usual state of affairs, The King of Shaves Company Ltd. has launched a bond, the Shaving Bond No.1, directly to the public. The company was launched by Will King in 1993, when he ran into troubles in the last economic downturn. The bond can be purchased directly from the company; it has a 3-year term and produces a gross 6% return. Up to £5,000 can be invested per person.

The bond effectively will have no guarantees, and so is a high-risk investment, but it does demonstrate how the market is changing.

It does raise a question, however, and that is, how many people will invest in the Shaving Bond No.1 and yet not really understand what they are doing? If you think about it, would you lend money to someone without knowing that they could pay it back? How many people will lend the company money without even looking at the company accounts?

The company is looking to raise £5,000,000 as a "war chest" and the money will be used to help them compete with bigger players in the market, such as Gillette. The company's turnover is around £20,000,000. This means that they are looking to borrow 25% of their actual turnover, not their profit turnover. This is a huge amount to borrow, and so what is the likelihood of being able to repay the money in three years' time? To repay this money, the company's profit in three years' time must have grown by at least £5,000,000 to be able to pay it back!

If you get the chance, look at the website at shavingbond.com to see how brilliantly the bond is being marketed. We really must take our hat off to Mr King, as the timing and marketing are excellent. We just question the quality of the investment on financial grounds.