Direct Investment in Gilts vs Unit Trusts

WharpBlast

I am new to investing in Gilts and am thinking of topping up my pension with a Gilt investment through a SIPP. The investment would be held for 2 to 7 years. With the relatively low returns Gilts provide, costs become more significant. So the question is should I invest in Gilts directly or through a Unit Trust. By investing directly I can avoid the annual management charges. For investing directly are there any other hidden costs like bid/offer spread ? What are the risks ? Do managers of Unit Trusts earn their fees ?

Any relevant advice welcome.

WB.

EdInvestor

If you understand how to invest in gilts directly, there is no point IMHO in paying additional charges when returns are already low.

dunstonh

Unit trust funds can give you access to a range of fixed interest/bonds/gilts which are harder to access directly. Whilst direct purchase would be cheaper, gilts are not exactly good value right now whilst "other bonds" and "global bonds" are not too bad. Whilst funds would have an annual management charge, these tend to be lower on low risk funds than equity funds plus the return after charges is currently 2-3 times more than gilts. Bid/offer spreads can be avoided if purchased through the right providers.

Do unit trusts earn their fees? yes if you get the right spread. (spread being more important than picking best fund).