Am I being mad and stupid with this idea?

Mr_Mumble

Lynz, hopefully you aren't put off by the arguments by the regulars on this board. It often happens that a query here spirals into a tit-for-tat. I've been guilty of that in this thread but as with other posters, especially Ed, its an impassioned belief that is well meant but can be overwhelming.

Gilts are British Government Bonds. They're the main way in which the government borrows money. Gilts are similar to other corporate bonds but pay a little less interest since they're considered less risky.

http://en.wikipedia.org/wiki/Gilts

cheerfulcat

EagerLearner wrote: »

I have now invested what I wanted to outside of UK (no major amounts, £100 into a few funds testing waters and watching/learning daily), I know I am doing it backwards but now want to do UK as the (apparent) safest bet for the core of the portfolio - seems that I'm left with:

- UK Gilts
- UK index linked guilts
- Uk corporate bonds
- Uk other bonds
- UK Equity and bond income

Assuming interest rates will go up on Thursday to 5.75%, which would I be best investing in?

And if the interest rates stay at 5.5%?

Just general thoughts much appreciated, learning as much as I can.

Thanks!

Hi, EagerLearner,

Gilts and ( to a lesser extent ) corporate bonds are less risky than equities partly because they have a fixed return when they mature - regardless of what it trades at throughout its life, a £100 bond will be repaid at £100. In the meantime you collect the interest. The trouble starts when you pay more than face value - pay £110 and hold the bond to maturity and you are guaranteed a capital loss, though you have still collected the interest along the way.

Bond prices have gone sky-high in recent years; the so-called " risk premium ", that is, the extra couple of % return you get for taking a risk over cash, has all but disappeared. Even "junk" bonds are yielding no more than 7%-ish. If general interest rates rise then the prices of the bonds will fall to push the yield up.

FWIW I personally don't see any value in fixed interest right now; for my safe money I prefer cash. But out of your list I think I would go for UK Equity and Bond Income ( or perhaps just Equity Income? )

EagerLearner

Thanks cheerfulcat and welcome back Lynz!

Would it be better then to think only between UK Equity & Bon, and say Global bonds?

Or maybe I should just take the plunge and buy some shares as previously discussed...

TBeckett100

0.25% of a hundred quid isnt exactly worth getting the calculator out
neptune russia is my tipple

dunstonh

Global bonds dont offer much potential for the risk at this time. That said, there are a couple of bond funds in the UK Other bond sector which have global exposure and have potential but of course, UK other bonds are higher risk than typical fixed interest funds.

EdInvestor

cheerfulcat wrote: »

FWIW I personally don't see any value in fixed interest right now; for my safe money I prefer cash.

Quite agree CC.Actually given there's no tax advantage and very few people hold genuinely safe individual gilts to maturity, I wonder whether ordinary investors should bother with bonds at all these days.The market is hard to understand and the premium for taking the risk is meagre compared with the return on cash - which people can understand, and where there are plenty of competitive products.On the pensions front you can even hold cash in SIPPs these days.

Do we need bonds and gilts if we can invest in cash, shares and property (residential and commercial)?

EdInvestor

Mr_Mumble wrote: »

I've been guilty of that in this thread but as with other posters, especially Ed, its an impassioned belief that is well meant but can be overwhelming.

I do sometimes get impassioned if I see people being ripped off by the system or deliberately bamboozled, I admit.

There seems to be less of it these days, I'm pleased to report

EagerLearner

We have the following as of last week:

£200 in Jupiter China
£100 in Lazard Emerging Markets
£100 in First State Global Natural Resources
£100 in New Star European Growth (in my 'pending' section)
Possibly £100 in Jupiter Emerging European although it isn't showing on my 'pending area'?

I planned the Jupiter Emerging because it has over 50% in Russia, so glad you are thinking the same TBeckett, shows at least I got one area close to right! If it doesn't go through I may go for Nepture Russia.

Might put another £200 into any 2 of the above but not sure where yet.

Then I will focus only on safer bets, just wanted to get these pesky risky ones out of my system ... given that outside of UK and Europe seeeeems to be best area for growth right now (apart from US and Japan) Question is, where is safe...

(Eagerly awaits Thursday Midday to see whether that 1st property rung is any closer)

Mamzie

EdInvestor wrote: »

If I had 500 quid and wanted to learn about investing in the stockmarket, what I would do is open an account at one of the very cheap brokers, like Halifax Sharebuilder, where you pay very low dealing costs and then buy 50 quid's worth of shares in each of 10 diversified big UK companies, household names. Each one would be from a different sector, so as to reduce risk, eg one bank, one oil company, one telecom, one pharmaceutical,one utility etc.

Then I'd sit back and watch what happens.I wouldn't buy or sell any of these shares, just observe, and come on here and ask questions every time something happened I didn't understand.

I guarantee anyone who does this will learn a lot about how the market behaves and about how to invest successfully.It will be interesting, and it will not be a high risk thing to do.

Here are top 30 companies for anyone who wants to try:

HSBC Holdings PLC
BP PLC
Vodafone Group PLC
GlaxoSmithKline PLC
Royal Bank of Scotland Group (The) PLC
Royal Dutch Shell PLC
Barclays PLC
Anglo American PLC
HBOS PLC
AstraZeneca PLC
Rio Tinto PLC
Tesco PLC
British American Tobacco PLC
Lloyds TSB Group PLC
BHP Billiton PLC
Diageo PLC
Xstrata PLC
BT Group PLC
BG Group PLC
Standard Chartered PLC
National Grid PLC
Aviva PLC
Unilever PLC
Reckitt Benckiser PLC
Prudential PLC
SABMiller PLC
Imperial Tobacco Group PLC
BAE SYSTEMS PLC
Cadbury Schweppes PLC



There is no real need to do any further research (it will just confuse at this stage)other than perhaps look up the sector of any unfamiliar companies.Just pick your 10, buy and watch.

I have just read this oldish thraed and found it fascinating. (so sorry in advance for bumping it)

I wondered if anyone could update a newby (me) on how these companies are now. And also if the new investors see this, how their portfolios are working out.

~Chameleon~

As someone who has been paying close attention to recent market activity and waiting patiently to invest a small amount, I'd also be interested in hearing updated opinions on the above list.