index linked gilts

donquixote_2

Does anyone know the best and cheapest way to buy a substantial amount of Index linked Gilts? Is it best to buy them at issue? When are they issued? I read recently that one should have a major portion of ones investments in these things later in life. As I am coming up to 55, I thought it appropriate to start buying.

Thanks for any advice.
Don

dunstonh

Index linked gilts (ILG) dont get issued that often nowadays. Of the current ILGs still trading, only one has been issued since 1992 and that was in July 2002.

You can buy and sell them between issue date and maturity but the price will reflect the demand for that particular ILG. As it gets closer to maturity, the price will return to its £100 price. So it is possible to make a capital gain or loss when dealing in gilts.

You say you read you should have a major portion of your portfolio in these in later life. However, you should decide your own risk attitude and not let a newspaper article or somoene else tell you what it is. Remember the newspapers were comparing tech funds to corporate bond funds a couple of years back saying how much better tech funds were. They should never be compared as like to like and we all know what happened to the tech funds. Certain newspapers print an awful lot of crap and say things that a financial advisor would never get away with. (assuming it was a newspaper here and going slightly off topic ::) )

Generally, people do tend to lower their risk attitude as they get later in to life. However, there are many ways to do this and the how much you decide to do depends on you and you alone. It is also dependent on the size of your portfolio, purpose, tax situation (Income, CGT and IHT).

You can buy gilts individually and in unit linked funds for ISAs, OEICs, Unit Trusts, Life Bonds and Pensions. You can also get offshore gilt funds and gilts issued by other countries.

You can get more info on individual gilts at http://dmo/gov/uk/gilts

Pal

To add to DD's comments. A lot of people recommend index linked gilts for pension funds as people approach retirement because their value general tracks annuity rates if you are buying an index-linked annuity.

In other words, you can still buy the same amount of pension when you cash them in, even if the face value of the Gilts falls.

In practice this only really works if you are buying a Gilt fund, rather than directly owning the gilts.

Owning bonds is a reasonable strategy for some people but you need to sort out your investment objectives first to figure out if it is appropriate for you. What are your timescales? what income do you need? What tax band are you going to be in? How much risk are you willing to take? How long do you believe you will live? and so on.