Why bother with ISA now - bonds seem the better option

Catbells

Question. How do you go about buying bonds? Also are gilts the same as bonds? Thanks.

dunstonh

Catbells wrote: »

Question. How do you go about buying bonds? Also are gilts the same as bonds? Thanks.

What sort of bond?

Bond is the most misused term in financial services. The banks have recently made this worse by deciding to call what were always known as fixed term deposits "bonds".

Gilts fall under the fixed interest/bonds sector. Corporate bonds, high yield bonds etc do as well. Most people will buy bond funds and usually its worth doing a spread of bond funds to cover the different types and risks. Some people will buy a single corporate bond but that does increase the risk a bit (100% in one company).

If you want bond funds then you can either DIY or use an IFA. Never use a bank. They dont have the knowledge or fund range.

Catbells

dunstonh wrote: »

What sort of bond?

.

Thanks for help on this. I'm learning about the financial world and its terminology since I know next to nothing about it, coming from a different background. I will use an IFA but have the sense I should know myself too where my money is being put, the risks, the various options etc.

On this particular matter of bonds and gilts, a friend who knows more than me is putting a large amount into index linked gilts believing that the recession is here to stay and worse. To me this means very little!!:eek:

dunstonh

On this particular matter of bonds and gilts, a friend who knows more than me is putting a large amount into index linked gilts believing that the recession is here to stay and worse. To me this means very little!!:eek:

One thing an experienced investor knows is that they dont know the future. Going too heavy in any asset class is a risk. Index linked gilts have a place in most portfolios. A cautious portfolio should have more than an adventurous one.

Personally, I am sticking to a spread as there is no way to tell which options will be best or worst.

Also, recessions occur in nearly every decade. Some or worse than others. Many have double dips. Some areas tend to suffer worse than others. This is not the first recession, its not the last and its not the worst (so far!). We never learn from our mistakes. They get repeated time and again as people have short memories.

At the moment you can read articles in the media from people that say there will be a massive depression or double dip but then recover, or no double dip or even a mini boom period. There are scenarios that could play out where any of those could happen. It doesnt take much to swing it one way or the other. This is why you see so many conflicting opinions. A lot of the media articles are from the US which has very different issues to those in the East. Some of those articles are printed months earlier but get regurgitated long after the data that gave that opinion has changed.

Catbells

Thanks Dunstonh. My friend is also spreading the investments as you mention.

Lesson learnt: no one knows what the future will hold.