Fixed income or cash in asset allocation.

TWM_2

Hi.

In asset allocation, are fixed rate accounts, fixed rate cash ISAs and regular savings accounts classed as cash or bonds/fixed income?

For example, I have an ICICI HiSAVE Fixed Rate Account fixed at 7.1% for a year, a Northern Rock Cash ISA fixed at 3.5% for a year, and a Barclays Regular Saver account fixed at 6% for a year.

Whatever your answers, I'm sure it will spark another question.

Thanks for your help.

TWM.

Lokolo

They are classed as cash.

Fixed Income/Bonds are corporate bonds, gilts etc.

purch

They should be classed as Cash.

Fixed Income is/are Bonds issued by Governments/Corporations which carry a fixed coupon (interest) but are traded on markets, so can cause a capital loss or gain.

TWM_2

Thanks, everyone.

I officially have too much cash!

Brace yourselves for another question on how to make a better allocation.

TWM.

JoeCrystal

Cash is never too much although, within my [STRIKE]Asset Allocation[/STRIKE], [strike]Portfolio[/strike], Percentages, Cash make up 98.50% Still, I am somewhat puzzled over how to buy Gilts and Corporate Bonds . One day, I was hoping to have my [Strike]Asset Allocation[/strike] [strike]Portfolio[/strike] Percentages to look like this:

60% Cash, 24% Bonds/Gilts and 16% Shares. Currently though, it is 98.50% Cash and 1.50% Shares.

dunstonh

bonds/fixed income?

Bonds/fixed income means real bonds and fixed interest securities. Not fixed term deposits that some banks and building societies market incorrectly as bonds. Its a pet hate of mine that the term "bond" is incorrectly over used.

within my Asset Allocation

If you are using an online too, make sure its not American and note the difference between sector allocation and asset allocation (sector is used more for investment funds and asset is used more for shares).

JoeCrystal

Well, thank dunstonh for that information. I took a quick look on what they actually meant and edited my last post. I used 'Asset Allocation' as a way to point out what I got in there and over there, etc. Wondering what is proper word to use now.

dunstonh

For clarification, American asset allocation tends to be very inward looking and based on US taxation and rules. You tend to find when they talk of equities they have two distinctions, US equities and rest of world (and go heavy on the US). Whereas in the UK we regionalise the world so you get UK, Europe (exc UK), Japan, Far East, US, Emerg Mkts, Specialist, Fixed interest, property and cash.

Someone dealing in shares or other direct assets will look at asset allocation, meaning x% of shares in banking or manufacturing or retail etc. Someone dealing in funds will look at the sectors, as above, because that is how funds are classified.

Joe, you look as though asset allocation will be your choice as you are looking at holding shares and individual gilts rather than funds.

JoeCrystal

dunstonh, Thank you for your clarification. It is true that I am holding shares as well looking at purchasing gilts in near future. So from what you are coming from, Asset Allocation in share context does mean for me holding various percentage of shares over seven sectors.

EdInvestor

To clarify

When investing directly, asset allocation refers to distribution between asset classes, eg shares, fixed income, property, cash.

Sector diversification refers usually to holdings of shares distributed over various sectors, eg financials, consumer goods, property, resources etc.Sector diversification may also apply to shares in international markets.


The UK system is organised to suit fund managers rather than direct investors and often serves mainly to confuse people. IMHO it is best ignored.