What bonds/gilts do people hold?

gadgetmind

Gilts scare me right now, in fact they started scaring me 8 months ago, and I reduced a lot. This means I lost out on recent gains, but I don't mind missing the part of the bubble just before the pop!

I'm looking at trimming even further and instead going for very short-dated bonds. I have my eye on a couple of funds, but wondered what others use for fixed interest in these difficult times?

sorcerer

I did think of getting into Gilts. but like you I am worried about the bubble bursting, I still hold some High Yield bonds and that's it at the moment.

webnibbler

Mine are mostly coporate bonds. With low growth and interest rates rumoured not to rise until 2013 is any bubble not likely to continue at least a while longer?

gadgetmind

webnibbler wrote: »

Mine are mostly coporate bonds.

I'm looking at the Smith & Williamson Short Dated Corporate Bond Fund. No up front or bid/offer on Best Invest, no trading fees, and TER *only% 1%.

With low growth and interest rates rumoured not to rise until 2013 is any bubble not likely to continue at least a while longer?

I just don't see any upside and the yield is not much better than corporate bonds. I do currently have a percentage in my plan for the Vanguard gilt and bond trackers, but am very tempted to knock this down lower or even to zero!

This is really as an alternative to holding cash in my SIPP and I intend to move back to a normal bond/gilt split if/when normality is restored regards bond/equity yields.

(Yes, I know bond yields have exceeded those on equties for considerable periods, and advice used to be 50:50, but the difference right now is huge.)

webnibbler

gadgetmind wrote: »

(Yes, I know bond yields have exceeded those on equties for considerable periods, and advice used to be 50:50, but the difference right now is huge.)

It is a concern with the higher volatility of corporate bonds - I'm planning to hang on to the bond allocation for the moment, but watch it very closely over the next six months / year. It's nice to have something in positive territory on the books !

gadgetmind

webnibbler wrote: »

It is a concern with the higher volatility of corporate bonds

The short dated ones are pretty steady.

It's nice to have something in positive territory on the books !

Hey, two of my holdings were the best performing FTSE shares today!

webnibbler

gadgetmind wrote: »

Hey, two of my holdings were the best performing FTSE shares today!

I think some shares in my ISA may be positive - but lately it seems to depend on which day of the week I look! It's the Euro yo-yo.

bongoali

re: shares.. do you guys trade on individual shares?

re: bonds.. are they similar to shares in that you can invest into individual bonds or groups of bonds = 'fund' ?

are you saying that bonds have given a better return than shares in recent times?

oldvicar

I don't see the Gilt bubble bursting anytime soon. Whilst the independent BoE's QE programme continues to outstrip the government's need to borrow, and annuity providers are effectively forced buyers, the only way is up (in prices down in yields) for the time being.

However, unless the world becomes so topsy-turvey that people are willing to invest for a guaranteed loss to redemption in a safe-ish haven such as UK debt, then simple maths shows that there can only be limited upside. On the other hand, looking at the downside from the top of this precipice it is an awful long way down, even to where things were just few years ago.

Long-dated linkers, although very expensive might just come good if inflation really does run amok beyond even the doomsters' predictions ... althugh the same would then be true for certain precious metals and they have gone up a lot recently too.

TBH, I can't see much value in any fixed interest just now. In many cases the ordinary shares of companies look more attractive than their corporate bonds. The odd bank/BSoc deposit fixed rate for spare cash maybe (with suitable break clause), but otherwise I think now is a good time to bide time. I think rates will remain low for quite some time, longer than many expect. And then they will shoot up when inflation can no longer be denied but has already done a lot of damage (to savers) or a lot of good (to debtors including the government) depending on your point of view.

I am a silly old fool who keeps most of his money in the bank or buildng society or NS&I certificates. But for those who follow a proper investment strategy driven by asset allocations, I'd venture that now is a good time to be underweight in fixed interest bonds compared to traditional allocations. Then again, like OP gadget I would have said the same 8 months ago, and 8 months before that!

deadpeasant

This thread is very interesting but as a relative newbie I'm not sure I fully understand it. (I find bonds/gilts quite confusing.)

I started investing 6 months ago, with a lump sum, broadly following Tim Hale. For a while I hesitated to go for big gilt holdings after reading posts here which said, roughly: 1. Don't buy gilts, we're in a 30 year bubble. 2. Don't buy IL gilts, inflation is going to fall and you'll be sorry.

I decided to ignore the posts and stick to Hale. So I put about half my lump into gilts (HSBC gilt index, Royal London IL gilt, M&G IL gilt). 6 months later my portfolio is positive, as my gilt gains have been bigger than my equity losses. (After the August crash I used some of my gilt profits to top up my equities on the cheap.)

Is the sense of this thread that I've merely had freaky good luck, that my gilts will crash and I'll soon be laughing on the other side of my face?

gadgetmind

deadpeasant wrote: »

(I find bonds/gilts quite confusing.)

Fixed interest such as bonds and gilts are far harder to get your head around than equities IMO.

I decided to ignore the posts and stick to Hale. So I put about half my lump into gilts (HSBC gilt index, Royal London IL gilt, M&G IL gilt). 6 months later my portfolio is positive, as my gilt gains have been bigger than my equity losses. (After the August crash I used some of my gilt profits to top up my equities on the cheap.)

Top man!

Is the sense of this thread that I've merely had freaky good luck, that my gilts will crash and I'll soon be laughing on the other side of my face?

I think you've showed that all attempts at macro-economic guesswork (very much including mine!) are doomed. I'll therefore put that percentage back next to my Vanguard gilt trackers but will also do the short-dated ones.

Short-dated bonds/gilts don't change in value as much due to either changes in inflation, interest or safe-haven seeking as the "yield to redemption" is far more stable.