Corporate Bonds - Still Worthwhile?

JamesU

Jake'sGran wrote: »

I did this last year and the year before but have been worrying lately that Neil Woodford is having a mid life crisis. His two funds are well down the performance table. Got to stick with it for a while I suppose.

Reposting this link in case you have not seen this, you might find it interesting.

JamesU

http://www.investorschronicle.co.uk/InvestmentGuides/Funds/article/20100215/eedf794a-17cf-11df-b0bd-0015171400aa/On-the-defensive.jsp

Jake'sGran

Thank you James. I am happy to be reassured. I did know that Neil Woodford's funds had been exceptionally popular.

I am not a short term optimist but have still made a couple of bad decisions but I reassure myself by thinking of the £3k I put in BG a long time ago and which has more than quadrupled, fortunately in a PEP.

jamesd

Jake'sGran, so long as you get a good balance of right and wrong decisions you can end up doing as well as the pros. Nobody gets things right all of the time. And if you're making a mixture of good and bad decisions, that's where a mixed portfolio comes in, to limit how much money you might lose on any bad or unfortunate decisions.

Jake'sGran

Must tell you that last summer I transferred a cash ISA worth about £5k to HL and chose three funds and one of them, First State Asia Pacific leaders is now worth 37% more and the same company's China Growth fund has gained £582 on an investment of £832. Certainly beats 3.5% in a building society and I am hoping it will continue.

worldtraveller

Mr.Brown wrote: »

Fed up with my cash ISA, very small return, have switched completely into Corporate Bonds, adding to my already heavy position. Great profits last year, great yield, but wondering about the outlook.

Is it a bubble? Is inflation a risk?

Please reassure me.

IMHO, yes, it's a bubble ready to burst soon! Therefore I honestly can't reassure you. Personally, I've taken the large gains over the past year or so, in both equities & corporate bonds (overall personal average of +54% over the past year in SIPP & ISA funds) and converted around 2/3rds into cash over the past couple of months on the highs. I'll be drip feeding back in to equities when we see the short/medium term market corrections, one of which, I believe, is due shortly.

jamesd

Jake'sGran, well, it may continue but it's also possible to take some profits now, perhaps by moving a bit of the money to a general emerging markets fund like Aberdeen Emerging Markets. That'll move up and down less than those so if there is a drop your gain will reduce by less. But you'll make less on any further increases. Maybe put say 10% of the gain in something like Invesco Perpetual Income. Or maybe put 10%-50% of the gains you make each month from now into something safer.

This sort of thing is part of why you do rebalancing to target percentages for different investment types: it locks in some of the profit made during boom times so you lose less during the busts. It can be as hard to sell during boom times as it is to by during times just after a bust.... but it's one way to make money.

I've been doing a bit of this risk downgrading myself. Not a huge amount, but some.