Index-linked Gilts

lemon26

Just wondering would investing in an idex-linked Gilt be a risk-shy way of diversifying my portfolio? I think we've all seen recently that RPI has risen and many are speculating that inflation will start to rise in the future so what I've got in mind is putting around 20% of my portfolio into the Legal & General Index Linked Gilt Index Trust and re-investing the income from it. This fund quite a low expense fund and has performed reasonably well over the last 5 years so would it be worth a punt? Thanks for your thoughts, L

kingmonkey

Pretty low risk & very likely to have returns above inflation. Some other people invest in gold as an inflation hedge. I'd rather index-linked gilts as the returns would be slightly more predictable.

20% seems high to me, but it depends on your risk profile.

ses6jwg

I have the M&G index linked gilt, had it around 5 weeks currently showing a 0.4% loss.

Do these gilts generally go up slowly over time or can their value decrease like any other investment?

Aegis

ses6jwg wrote: »

I have the M&G index linked gilt, had it around 5 weeks currently showing a 0.4% loss.

Do these gilts generally go up slowly over time or can their value decrease like any other investment?

The value will go up and down depending on market sentiment. If you hold gilts to maturity you can avoid the capital fluctuations by knowing exactly what you'll get for them on a specific date, but most of these funds trade them more regularly than that.

ses6jwg

Its within my "boring" s&s ISA so not bothered about raging growth (I have an investment account for that).

I'd be happy with a 3% return, they only make up a small portion of my portfolio as a guard against inflation.

Myrmidon_J

ses6jwg wrote:

Its within my "boring" s&s ISA so not bothered about raging growth (I have an investment account for that).

Just wondering - would you not be better off investing for "raging growth" within a wrapper that does not tax capital gains?

ses6jwg

Myrmidon_J wrote: »

Just wondering - would you not be better off investing for "raging growth" within a wrapper that does not tax capital gains?

unfortunately it doesnt always work out haha.

the initial amount I have invested is fairly modest and in all probability will not encroach on capital gains

Aegis

ses6jwg wrote: »

unfortunately it doesnt always work out haha.

the initial amount I have invested is fairly modest and in all probability will not encroach on capital gains

If you keep doing it, eventually it will build up. I've seen someone recently who has managed to accumulate about half a million in his ISA by continual deposits into PEPs, TESSAs and ISAs plus a fair few very good investments.

That sort of sum would definitely be in CGT territory if it was outside an ISA!

lemon26

If 20% of my portfolio would be too high, what would be advised? It would lessen in % of portfolio as my monthly savers add up as I'm quite heavily into equities at present and I think I've missed the opportunity to see much growth on gold-related funds due to gold's massive value increase recently. Would the L&G fund be a good one with 0% initial charge and 0.22% TER to put into my portfolio then?

Aegis

lemon26 wrote: »

If 20% of my portfolio would be too high, what would be advised? It would lessen in % of portfolio as my monthly savers add up as I'm quite heavily into equities at present and I think I've missed the opportunity to see much growth on gold-related funds due to gold's massive value increase recently. Would the L&G fund be a good one with 0% initial charge and 0.22% TER to put into my portfolio then?

The percentage of fixed interest holdings you have will depend on your age, your risk profile and your goals for the money. Those three factors can, as you will probably appreciate, result in an enormous range of answers from "none" to "almost all".

20% specifically in gilts would generally be very high for anyone more than 5-10 years from retirement, at least from what I've seen.

lemon26

Thanks Aegis, I'm 26 and will be retiring in 29 years. I was thinking of getting a lump sum now which would take me to 20% of portfolio then increasing my equities holdings (and maybe even property) over time which would reduce the proportion of gilts in my portfolio. Or would a regular savings plan be better as it will build up over time and I can pound-cost average?