Asset Allocation and Bonds

sva19

For one of my portfolios (Daughter 11 yr has 15 yrs to invest), I have decided on a assett Allocation as

Stock 90%, Bond 8%, Cash 2%

The question I have I a Children Mutual Yougster Bond alread running which accounts for 8% of the investment portfolio already and wanted to know as this is a BOND, would that be suffice for the 8% bond I mention earlier in assett allocation.

Or Is the BOND the Bonds in unit trust funds that I should buy?

dunstonh

The question I have I a Children Mutual Yougster Bond alread running which accounts for 8% of the investment portfolio already and wanted to know as this is a BOND

Why is that a bond? Is it invested in fixed interest securities/bonds? or are you getting mixed with the use of marketing incorrectly calling it a bond?

Bond is the most mis-used term in investments.

sva19

It is a with-profit bond invested for 15 yrs, £25 per month. My question is that is this investment suffice for the Bonds allocation and I don't have to buy bonds funds as part of my assett allocation. I don't want to duplicate investments!!

info from the children website
Where's the plan invested?

Youngster Bond Extra invests in our With-Profits fund (called the Tunbridge Wells Equitable Life and Endowment Fund). This fund holds a mix of assets including company shares, government bonds, property and cash.

Lokolo

This isn't the same as the bond you want in your asset allocation. As you can see, this 'bond' includes stocks and property(!).

You should also split your stock % into UK, Europe etc.

sva19

Thanks. Ok then the Bond will be invested vai the funds. my portfolio I am going for my daughter is as follows, she can take bit extra risk as young got 15 yrs to run.

BONDS - 8%
UK - 27%
EURO (EX UK) - 20%
ASIA - 20%
GLOBAL/ EMERGING - 15%
AMERICA - 10%

The global catergory will include specialit funds like commodities and Tech as well.
The UK and Euro will also include smaller companies fund.?

Does this sound like a good diversified portfolio for growth for a agressive risk investor?

jon3001

In terms of portfolio building, a bond is a debt instrument. As an investor you would be typically be lending money to a company (e.g. Tesco) or a government (e.g. UK).

The bond will pay a fixed coupon (a £50,000 bond paying 7% for 15 years). In this case the money raised was £50K. However the bond is tradeable on the open market and its value will fluctute because of interest rates and other economic factors. The coupon remains constant. The full £50K is repaid on maturity (assuming the issuer is solvent).

The retail investor will usually get exposure via a bond fund.

sva19

Hi Jon3001, so what are you saying by the below?

The retail investor will usually get exposure via a bond fund.

jon3001

sva19 wrote: »

The retail investor will usually get exposure via a bond fund.

Rather than dump £50,000 into a single bond issue let the fund manager spread your (and other investors) money over many bonds to reduce the risk and make the bond market easier to access.

Example investment sectors:
http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?companyid=&tab=prices&sectorid=150&tab=prices&x=15&y=14
http://www.h-l.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results?companyid=&tab=prices&sectorid=127&tab=prices&x=9&y=9

sva19

OK, Thanks, Yes I will pick bonds fund from the bonds and gilt sector.

Going back to my original question, does the below sound like a good diversified portfolio?

BONDS - 8%
UK - 27%
EURO (EX UK) - 20%
ASIA - 20%
GLOBAL/ EMERGING - 15%
AMERICA - 10%

The global catergory will include specialit funds like commodities and Tech as well.
The UK and Euro will also include smaller companies fund.?

Does this sound like a good diversified portfolio for growth for a agressive risk investor?

dunstonh

It is a with-profit bond invested for 15 yrs, £25 per month.

So, its an endowment. And expensive and low quality as well. What made you buy that?

My question is that is this investment suffice for the Bonds allocation and I don't have to buy bonds funds as part of my assett allocation. I don't want to duplicate investments!!

No, as mentioned above, its not a bond. The bond in the name of the product is just a marketing name to make you think its something other than an endowment policy (so something very similar to an endowment).

sva19

thanks, The IFA advise it as a tax free way to invets for a child, its £25 per month for 15 years?

Are these no good?

Been running for 4 years, I was wondering about getting out as £25 per month could be invest better elsewhere? Views?