A couple of interesting docs from Vanguard

Ark_Welder

gadgetmind wrote: »

Purely by coincidence, I spent an hour or so last night looking at the fixed interest holdings of the cautious and defensive funds. They seem to be helping linked gilts and TIPS, so it doesn't look like their feet are totally cold just yet.

Linkers are addressing a different scenario (or perhaps, 'opposite') to conventionals: inflation. Interest rates will, or should, rise to combat inflation so linkers should still be able to perform going forward - largely depends upon the extent to which inflation takes a hold. TIPS have an interesting feature in that they have a minimum redemption value of par, unlike UK ILs. So a fund holding these is also hedging its bets, somewhat.

gadgetmind

Ark_Welder wrote: »

So a fund holding these is also hedging its bets, somewhat.

I was deliberately looking at funds/ITs that regard long-term capital preservation as being more important than short-term gain.

Do you think a mix of cash, linked gilts, investment grade corporate bonds, and some infrastructure such as HICL represent a decent foil to the volatility of the 80% of equities I'll be holding?

Or maybe forget the bonds and buy a wodge of Personal Assets to sit alongside!

Ark_Welder

gadgetmind wrote: »

I was deliberately looking at funds/ITs that regard long-term capital preservation as being more important than short-term gain.

Do you think a mix of cash, linked gilts, investment grade corporate bonds, and some infrastructure such as HICL represent a decent foil to the volatility of the 80% of equities I'll be holding?

Or maybe forget the bonds and buy a wodge of Personal Assets to sit alongside!

My holding in PNL forms the 4th largest in my pension funds! If it were combined with Trojan (which is outside the pension) then it would form my largest holding, either inside and outside. Says where I'm coming from, I suppose.

The 20% in the asset classes listed should form a reasonable foil. Given the sometimes 'US Dollar vs. The Rest', investment-grade corporates have sometimes shown an increased correlation with equities recently, but with lower volatility. But overall, there ought to be more potential with high-grade corporates than with sovereigns over the next few years or so. Assuming that things don't completely go down the swannee...:))

How would you hold the corporate bonds? If you're thinking of using a tracker of some sort (e.g. via an ETF) then check to see what it is tracking. Some of the indexes are based upon debt-issuance volume, so the more debt a particular company issues, the higher its weighting in the index. Is holding a higher amount of a more-indebted company necessarily desirable? I can't give specific examples, just from stuff that I've read.

And all in my non-prefessional opinion, of course!



Some of the following might be of interest. You will need to logon to read the web-based articles, but the PDF reports can be downloaded without:

http://www.ft.com/ftfm/fixed-income-nov-11
http://www.ft.com/ftfm/index-investing2011

gadgetmind

Ark_Welder wrote: »

My holding in PNL forms the 4th largest in my pension funds! If it were combined with Trojan (which is outside the pension) then it would form my largest holding, either inside and outside. Says where I'm coming from, I suppose.

My wife holds a wodge (technical term!) of PNL unwrapper, and we both hold a mega-wodge in ISAs. None (yet!) in pensions.

The 20% in the asset classes listed should form a reasonable foil.

Thanks. It seems odd to diversify the safe stuff, but such is the nature of current affairs.

How would you hold the corporate bonds?

Vanguard® U.K. Investment Grade Bond Index Fund

"The fund seeks to provide returns consistent with the performance of the Barclays Capital Global Aggregate U.K. Non-Government Float Adjusted Bond Index, a market-weighted bond index of the pound sterling, investment-grade bond market, excluding government bonds with an intermediate-term weighted average maturity. "

Ark_Welder

Courtesy of eveyone's favourite platform provider....:p


http://www.hl.co.uk/news/expert-comment/are-gilts-overvalued

moneylover

I keep reading mention of Vanguard funds and H-L are apparently going to offer them now they know how to make money out of index trackers
What is it with these Vanguard funds - I can't get a grip on what they are all about

gadgetmind

Ark_Welder wrote: »

Courtesy of eveyone's favourite platform provider....:p

Yup, I'd read that, and a few others in the same ilk. However, everyone was saying the same a year back, and I found the argument equally as compelling then, which didn't exactly go as planned. I take some comfort from others also having swung too far, too fast, but have still vowed to use strategic asset allocation to under/over weight me rather less in future.

webnibbler

moneylover wrote: »

What is it with these Vanguard funds - I can't get a grip on what they are all about

Not much to grip really - Vanguard are simply super cheap index trackers, but which are also rather inaccessible for your average Joe retail investor.

The Vanguard LifeStrategy funds are index trackers of other Vanguard funds (as I understand it) which offer balancing but not lifestyling.

Lots over at http://monevator.com about using Vanguard.

gadgetmind

webnibbler wrote: »

which are also rather inaccessible for your average Joe retail investor.

This was certainly true when they had a £100k minimum investment, but they are now available on low-cost platforms. Some have dealing fees, and some have annual charges, but that's the way things are moving.

webnibbler

gadgetmind wrote: »

This was certainly true when they had a £100k minimum investment, but they are now available on low-cost platforms. Some have dealing fees, and some have annual charges, but that's the way things are moving.

Yes, that’s true. I’m holding on at H-L in the expectation that they may work out reasonable for Vanguard. Although I suspect they will ensure the fee will work out at around the £200 mark regardless of what you hold.