UK Gilts in ISAs

jamesd

You appear to be considering investing now. You can't buy at the prices four or five years ago and you can't persuade the future to give you the same gains because what's caused them isn't repeatable.

Youre job when buying is to try to work out what'll do well in the future, not look at what did well in the past. The past can help if you think that the causes in the past are repeatable in the future. They certainly aren't when it comes to gilts. The past can also be useful for comparing different managers for the same investment type and approach.

Now's a good time to be selling gilts, not buying them. Only buy them for a short term holdings or if you are sure that they are delivering you enough other benefits for it to be worth the 40%+ capital loss you're going to see.

sorcerer

Don't get to hung up over what a fund has done over the last 4 years, it doesnt mean it going to do it again. I own funds that have done over 400% over the last 10 years and yet if I had bought them a couple of years ago, would have made me a loss.

kidmugsy

slinga wrote: »

So which fund(s) have beaten the 40% rise in M&G Gilt and Fixed Interest ISA over the past 4 years. Or even other investments.

Certainly none of the UT funds I own have come close.

You clearly have a flair for missing the point.

slinga

kidmugsy wrote: »

You clearly have a flair for missing the point.

Don't get upset.
I'm still waiting for an answer about how a Gilt UT delivers returns of 40% over 5 years but gilts pay say 4% pa.

How?

kidmugsy

slinga wrote: »

Don't get upset.
I'm still waiting for an answer about how a Gilt UT delivers returns of 40% over 5 years but gilts pay say 4% pa.

How?

Because interest rates sank and therefore so did Gilt yields which means that Gilt prices rose and there's your 40%. In the past. Geeze, don't you understand this elementary stuff?

purch

slinga wrote: »

I'm still waiting for an answer about how a Gilt UT delivers returns of 40% over 5 years but gilts pay say 4% pa.

How?

Because the price of the Gilt has risen.

The return on a Gilt/Bond fund is dictated by the price of the security, not the coupon.

Gilt prices have risen substantially in the last 5 years, hence the 40% return.

The 8.75% 2017 Gilt, currently would give you a yield to maturity of less than 0.75% if you bought it now and held it until it matures.

The 8% 2021 Gilt would give you a yield to maturity of less than 1.5 %.

I think you need to do a lot more "homework" before you decide where and what to invest your hard earned money into.

jamesd

Say you bought a gilt paying 4% for £100 five years ago. Now say gilts are paying 2% (and ignore the five years difference). To deliver that 2% the price has to rise to £200. And that's how gilt fund deliver capital gains: the gilts they hold increase in capital value so the yields (interest) matches the market rate. The real rise isn't going to be a full doubling because the term is now shorter but that's a detail, the principle of how the mathematics works is correct enough for now.

This is also why you will suffer a large capital loss if you buy now. The increase in yields is delivered by a decrease in capital value.

Fixed interest investments like these are different from shares. With a share you really can get a long term growth in capital value that can last for decades. For fixed interest things like gilts its just mathematics and the ups and downs of interest rates that decide if the capital value goes up and down. You don't own a company that can grow its business, just a right to income and then a return of capital at the end of the gilt's term.

slinga

See the last three replies show you guys can do it with a bit of nudging.

Previous replies have been along the lines of you don't know anything stay away. No help at all.

I've said on here before a lot of posters have now developed into know alls and don't give new posters etc the answers they request.

If you want to discuss things at your high atmospheric level then maybe do it somewhere else.
A lot of us just want answers to questions not the obsequious answers that some seem to think is the norm.

Rant over.
Thread closed.

nicknameless

kidmugsy wrote: »

Gilts are poor value at present. I'd only buy them directly, never in a fund. A fund not only has very different characteristics from a gilt, it costs you money in charges too.

Have read this thread with interest. For someone starting out building a largely passive portfolio (via drip feeding) that will not exclusively be in equites (say 80 / 20) what are the options right now for constructing the 20. Wait for value to improve? Alternatives?

Also what are the negatives of gilt funds as suggested above?

Many thanks.

kidmugsy

nicknameless wrote: »

Have read this thread with interest. For someone starting out building a largely passive portfolio (via drip feeding) that will not exclusively be in equites (say 80 / 20) what are the options right now for constructing the 20. Wait for value to improve? Alternatives?

Also what are the negatives of gilt funds as suggested above?

Many thanks.

Unlike bonds, bond funds don't have a maturity date, nor a guaranteed maturity amount, nor guaranteed dividend ("coupon") payments on guaranteed dates. And they do have charges: a charge of, say, 1.25% p.a. takes a large chunk of the income you seek.

If, like me, you think bonds poor value, your choices are limited. I favour cash held in Cash ISAs (e.g. tracker ISAs such as those offered from time to time by Cambridge BS), and ns&i Index-Linked Savings Certificates when available: I'm hoping that some may go on sale in May.

If you think fiat currency is risky, you could lay off some risk by investing in gold or silver. Some people hereabouts seem to hate the idea, but physical gold and physical silver ETFs have done well for us, and you can hold them in S&S ISAs. I don't know how well they might survive another great financial fiasco. Holding gold sovereigns seems appealing to me for anyone with access to safe-keeping e.g. a bank safety deposit. Unfortunately the banks near me seem all to be abandoning the service so we've never bought coins. You could also hold bullion overseas: there are well-known services storing gold and silver in Zurich and in Perth (WA). I have no experience with them though. I'd think that most people would class gold and silver in your "80" rather than your "20". I'm not sure that they fit into either.