Percentage of Gilts in Portfolio

FATHEROFTWO_2

I have a cautious to medium attitude to risk.
I am trying to build a completely balanced portfolio and am at the final stages.

I am looking to add some gilts funds.

One that looked promising is....

Allianz PIMCO Gilt Yield

What do viewers think of this particular fund and is Gilts a good investment at the moment?

shaunrc

Hi

This is a difficult question for 2 reasons. One is the circumstances in which we find ourselves in where there is a lot of uncertainty. The other is that there is a flaw to my mind in how portfolios are constructed using models suggested by the FSA.

To deal with the flaw first. It is that investments are given categories, for example gilts are considered a safer investment without any regard to what price you may buy them at. However they are currently very expensive or to put this another way yields are historically low. The problem with this is that a share for example can rise and rise say like Microsoft or Google have but a bond usually has limits. Gilts have risen over the past 20 years and whilst it is not impossible they will rise further I feel that we have reached a point where they are more likely to fall than rise over a 5 year time horizon. Is something a cautious invesment when you expect it to fall? To my mind I would in such an environment say that currently they are medium risk or perhaps a little higher.

One factor that has increased risk in the UK is that the Bank of England has been buying gilts which according to the IMF has reduced gilt yields by around 1/2%. This begs the question of what happens when they unwind this? Also our government has a lot of borrowing to do and plenty of gilts to sell.

So it is not an easy choice. For example if we had a "lost decade" like Japan had in the 90s gilts might still have a decent run.

In the end it comes down to choice and opinion as looking forwards there are no certainties. But my suggestion would be to maybe have some gilts but maybe more cash than a model might suggest and perhaps to also look at some indexed linked gilts. Also in these times I feel that portfolios have to be looked at frequently as we are seeing a lot of changes...

Good luck with whatever you choose.

purch

is Gilts a good investment at the moment?

Probably not at this moment in time.

In fact, I would say it would be a high risk strategy to invest in a Gilt Fund at the moment.

Gilt prices are high, and have even rallied slightly recently.

It's hard to think that they could stay at such elevated levels when you look at the amount of new issuance on the calender.

Masomnia

How would you all feel about index-linked gilts?

FATHEROFTWO_2

Thanks all for your comments.
I have 13 funds in my portfolio and comparing it to what the experts call a balanced portfolio I am short of property and Gilts.

I have studied the trends and tend to agree with your points that this may be the peak of the gilt market.
I suppose they look too good to be true right now

What about property funds such as schroders global property?
My feeling is it might be best to hold off buying these as well what do you think?

Im thinking of topping up my first state global resources and asia pacific funds tomorrow

Also my neptune US opps.

Any thoughts on these?

purch

How would you all feel about index-linked gilts?

Within a Collective Investment vehicle, this could be a good time to look at them.

Outright, I would wait a while until RPI looks like it will start to rise. (which is what I am intending to do)

bendix

FATHEROFTWO wrote: »

Thanks all for your comments.
I have 13 funds in my portfolio and comparing it to what the experts call a balanced portfolio I am short of property and Gilts.

I have studied the trends and tend to agree with your points that this may be the peak of the gilt market.
I suppose they look too good to be true right now

What about property funds such as schroders global property?
My feeling is it might be best to hold off buying these as well what do you think?

Im thinking of topping up my first state global resources and asia pacific funds tomorrow

Also my neptune US opps.

Any thoughts on these?

I have a small pension fund sitting all by its lonesome self in Australia, the result of working there for two years. It's not worth much (about £10,000) and I can't touch it or contribute to it for another 15 years so I've effectively written it off as dead money.

I've just this weekend instructed the manager to move 50% of it into global property securities, and the balance in Australian shares.

Given the appalling performance of the property sector, I figure I might as well try to get in at the bottom.

Gilts? No, not yet. Not for at least a year, I reckon.

barny_100

purch wrote: »

Within a Collective Investment vehicle, this could be a good time to look at them.

Outright, I would wait a while until RPI looks like it will start to rise. (which is what I am intending to do)

RPI is already up from it's low earlier in the year...

However QE is skewing the UK Gilts market massively so I would consider the effect of this ending soon.