low-cost HSBC gilt index fund

12tonelizzie

low-cost HSBC gilt index fund

cing0

This fund is available with iii as well.

ses6jwg

What makes this fund attractive?

I was under the impression that gilt funds are overpriced?

Loughton_Monkey

12tonelizzie wrote: »

As I said, some get sniffy about gilt funds.

It is attractive relative to other gilt funds in that its TER is low and it may be held without further annual charge in the H-L ISA.

Gilt funds will perform well when the interest rates go down. They will cost you a bomb if they go up.

Do you have any idea.... er.... sniff.... if they will go down? Or will they go up?

If I want a new Jaguar, but know a place that would take 5% off the cost of a Skoda, I'm not sure I would buy it.

kidmugsy

Then consider the 2024 Index-Linked Gilt.

neilp

I am grappling with similar issues, and have just found out about the HSBC Gilt Index fund and its availability through HL (this is not mentioned on the company's website). Out of interest, I was wondering what your split is of conventional versus index linked gilts. At the moment, all my defensive holdings (about 33% of my portfolio) are in index linked gilts, partly because my priority for that part of my portfolio is capital preservation, and partly because I expect relatively high RPI inflation over the next couple of years. However, I had been wondering whether it might be sensible to move some of that into conventional gilts. I would appreciate any thoughts.

Reaper

neilp wrote: »

I expect relatively high RPI inflation over the next couple of years. However, I had been wondering whether it might be sensible to move some of that into conventional gilts.

If you expect inflation to go up then buying fixed return gilts would be a bad move. If you expect deflation which a small number of people do (not me) then they might make more sense.

kidmugsy

ILSCs are better for my purposes than ILGs of the same life - ILSCs can't go down in value if inflation turns negative, and they yield more. Also, it's my guess that a desperate government - and all post-Brown governments will be desperate for as far as the eye can see - will default more readily on gilts than on ILSCs, the latter being held by voters, the former often by foreigners and institutions.

neilp

Thanks for a very useful post. I have also drawn a lot on Tim Hale's book, which is the best on investment that I know of!

I think the chance of a default of gilts is extremely small (it would take events like what is currently happening in Greece, which I find hard to imagine here for several reasons, not least because most UK debt is long dated). However, the £15,000 limit on each issue of index linked saving certificates is a shame, given that they offer inflation protection without downside risk. In the absence of that option, and because preserving the real value of my capital is my priority, I am inclined with stick with index-linked gilts (through the Legal & General index fund), though you make a very good point about conventional gilts being a useful defence against equity market downturns.

Unfortunately, I doubt I will be retiring for around 30 years, so I should have time to weather the odd equity crash! I want to give myself the option of drawing on my index-linked gilt holding to help fund a house purchase at some point, probably relatively soon, which is why I am prioritising capital preservation - while having relatively high risk asset allocation for the rest of my portfolio.

I would be interested in what people think of this strategy

Sceptic001

kidmugsy wrote: »

... Also, it's my guess that a desperate government - and all post-Brown governments will be desperate for as far as the eye can see - will default more readily on gilts than on ILSCs, the latter being held by voters, the former often by foreigners and institutions.

If we ever get to a stage where the UK government is having to decide whether to default on gilts or ILSCs, we will all be more interested in our stock of tinned food than in our investment portfolios. :eek:

neilp

Thanks for another really useful message, which got me thinking and researching over the weekend. I have just rebalanced my portfolio to add a defensive element (the HSBC UK Gilt fund). I had already ring fenced the index linked gilt holding as potentially not long term.

Once again, I really appreciate your thoughts!