Portfolio & Corporate Bonds #2

sunnyyorkshire

I have 18% of my portfolio invested in Bonds (66% Stock, 6% Property, 6% Cash and 4% 'other').
The bonds are;

• Invesco Perpetual Global Bond
• Invesco Perpetual Corporate Bond
• M&G Strategic Corporate Bond A
• M&G Corporate Bond A

In light of the changing economy and comments in other posts, does 18% invested in bonds appear proportional in a balanced/speculative portfolio?

dunstonh

In light of the changing economy and comments in other posts, does 18% invested in bonds appear proportional in a balanced/speculative portfolio?

Depends on your risk profile. It may be too much or it may not be enough.

FATHEROFTWO_2

dunstonh wrote: »

Depends on your risk profile. It may be too much or it may not be enough.

What proportion of corporate bonds should you have in a medium risk portfolio?

Im guessing 25 percent.

Reason is my folio was 35 percent bonds and my attitude was to risk was cautious and im now reaising it to medium.Is this the correct proportion for both attitudes to risk?

sunnyyorkshire

My risk profile is balanced/speculative, and my original portfolio listed 20% invested in Bonds, which has fell slightly due to well performing equities.

I was going to re-balance the portfolio back up to the 20% figure, but many articles are now suggesting that Corporate bond exposure should be limited, as investers pile into equities due to the recovering market, which may undermine bond performance.

dunstonh

What proportion of corporate bonds should you have in a medium risk portfolio?

On a risk 5 out of 10 portfolio on my research/software its 38% (assuming typical risk levels for corp bonds and not high risk versions). Risk 6 is 26%.

sunnyyorkshire

dunstonh wrote: »

On a risk 5 out of 10 portfolio on my research/software its 38% (assuming typical risk levels for corp bonds and not high risk versions). Risk 6 is 26%.

So at 20% I may not be too far from the mark considering that I am prepared to take a slightly more speculative stance than balanced.

I suppose I shuld take a longer term view, and stick to the plan!

Thrugelmir

Fixed interest stocks will drop in price as interest rates rise. So a potential capital loss in the short term. Though providing the issuer doesn't default the full capital value will be paid out on maturity.

There's little upside on top grade corporate bonds as many are trading above par as investors have chased the safety of the yield.

So possibly a question of seeing how the political situation unfolds before making major investment decisions.

FATHEROFTWO_2

dunstonh wrote: »

On a risk 5 out of 10 portfolio on my research/software its 38% (assuming typical risk levels for corp bonds and not high risk versions). Risk 6 is 26%.

Thanks Dunstonh.

I ran the jupiter merlin balanced acc fund of funds through the morningstar X ray tool and it showed this allocation of bonds/equities.

Stock54.890.5054.39Bond21.522.0819.45Property0.000.000.00Cash24.5512.9211.64Other14.560.0414.53Not classified0.000.000.00




Is this Fund of funds higher risk than medium?

or does the medium risk fit between it and the jupiter merlin income acc
which is

Stock40.950.5340.42Bond43.132.3940.74Property0.000.000.00Cash27.5420.047.50Other11.390.0511.35Not classified0.000.000.00

thanks

Lokolo

A fund of funds is just another type of fund, but instead of having lots of stocks in it, it has lots of funds in it.

The balanced fund (fund of funds), is more of a risk 5 on Dunston's scale, whereas the other one is more risk 6.

dunstonh

The merlin income portfolio is around the cautious mark. The balanced one is at the medium mark as lokolo says.

Remember that everyone has their own definitions of risk and how the assets they use affect that risk. For example, on the software, if I had someone that say didnt want any property exposure, I could put nil in the property sector allocation and it would alter the other sectors to keep that risk level. There are different strategies, opinions and objectives so you should consider them ball park figures rather than benchmark figures.

Rollinghome

Thrugelmir wrote: »

Fixed interest stocks will drop in price as interest rates rise. So a potential capital loss in the short term. Though providing the issuer doesn't default the full capital value will be paid out on maturity.

There's little upside on top grade corporate bonds as many are trading above par as investors have chased the safety of the yield.

So possibly a question of seeing how the political situation unfolds before making major investment decisions.

Is there much of a case for UT bond funds in normal times anyway?

The exceptional once in a lifetime circumstances since March have pushed bond funds sky high but even now the average return over 5 years has been just half the return on cash and has rarely exceeded cash throughout. Bonds held directly may make more sense but those TERs that can be up to 1.5% make a whacking dent on such small returns.

What could help swing the balance might be in an ISA where tax on interest can be reclaimed, unlike tax on dividends, and where there isn't the realistic option of holding cash in choppy times.

Otherwise, isn't risk-free cash the better way to reduce risk than a bond fund staggering under management charges; especially as bonds did little to mitigate pf losses in the crash? That's a question rather than a statement because I've never quuite got the case for bonds so perhaps I've been missing something.