Corporate Bonds

bowlhead99

Freecall wrote: »

I have just been phoned by someone telling me that I can release my pension if I transfer it to them and invest in car parking spaces in <insert favourite third world country>. Aparently I am guaranteed a 25% return. Too good to miss?

"Thank you for your question, I totally have time to answer the eleventh one of these this week, because I can do them quite swiftly now, having already replied to those other ten since Sunday. For your information they are all listed on the first and second pages of recent threads. If it would help, I could send you the links to them for further background reading, just let me know.

In order to help ascertain suitability of the Bolivian car park space for your needs, I wonder if you could provide me with some insight as to what other provision you have for your retirement? Do you also have car park spaces in Senegal and Myanmar? I enquire because it is always good to diversify within an asset class.

Based on the reports I hear on the outcome of similar opportunities I think the return of 25% may, unfortunately, be optimistic. In comparable scenarios, the returns sometimes fall short of 5% of the amounts invested. One query I have, are you perhaps so mentally !!!!!! as to have presumed that the 25% would be on top of your initial capital, rather than being instead of your capital? If so, it may be worth consulting a responsible adult.

Please let us know if we can be of further assistance as you research the endeavour. I would also urge you to disregard any poster who shows up in the next five minutes with a post count of one, who claims that he dealt with this investment manager before with entirely satisfactory results. I would not wish to second guess the intentions of that good fellow and imply that he and his co conspirators are attempting to commit criminal fraud. However, it would be unwise to disregard the possibility that they are attempting to obtain a pecuniary advantage by deception.

Best wishes."

C_Mababejive

Well you know i think its time to draw a line under it..

Its very easy to feel slighted on here because its an exchange of words and not a face to face conversation where the perception and observance of nuances feeds in to the exchange.

If you read and write forums you have to be a bit thick skinned and just run with it..

We are not all experts but i have certainly received good input from mssrs Dunstoh, bowlhead and others..

Of course people will take the pish a little as in one of my conversations but its all part of the free learning process and nothing offends me..##

eg
https://forums.moneysavingexpert.com/discussion/5087976

Freecall

bowlhead99 wrote: »

One query I have, are you perhaps so mentally !!!!!! as to have presumed that the 25% would be on top of your initial capital, rather than being instead of your capital?

Mmmm, didn't think to check that but the caller said that it would be tax free so that must be good ......surely.





Oh well, had our fun, now back to normal

xemeter

drakesdrum wrote: »

I'm nearing retirement, and my asset allocation tends toward the cautious, and is broken down as follows:

20% UK equities,
20% Developed World Equities,
20% Index Linked Gilts,
20%Global Bond Index,
10%Corporate Bonds,
10% Commercial Property

Many thanks in advance.

Your asset allocation bears much similarity to the Vanguard Life Strategy (40% equities / 60% bonds) Fund, I don't think it seems strange at all.

A simple allocation, easy to manage and cheap to run.

Why pay 0.70% when you can it for less than 0.20%

Linton

xemeter wrote: »

Your asset allocation bears much similarity to the Vanguard Life Strategy (40% equities / 60% bonds) Fund, I don't think it seems strange at all.

A simple allocation, easy to manage and cheap to run.

Why pay 0.70% when you can it for less than 0.20%

Vanguard LS 40% is 10% UK equities, the OP is 20%. Vanguard LS 40% seems to have negligible property, the OP has 20% at least etc etc. So you arent comparing apples with apples. Perhaps the OP has good reasons for his choices and believes his allocation is superior. Suggest one focuses on what a fund is invested in before considering costs.

bowlhead99

xemeter wrote: »

Your asset allocation bears much similarity to the Vanguard Life Strategy (40% equities / 60% bonds) Fund, I don't think it seems strange at all.

It doesn't bear much similarity to the VLS 40. All they have in common is 40% equity.

The VLS has a quarter of its equities in the UK.
This portfolio has half of its equities in the UK.

The VLS fund has 0% in commercial property.
This fund has 10% in commercial property

Not counting the general 'global bond' piece which is pretty much the same in both, the VLS has 13% in corporate bonds while this porfolio has 10% corporate bonds. Not a massive difference but a few percent here and there makes a difference to some people. I suppose it is inevitable to have more corporate bonds and other types of bonds when you are entirely lacking commercial property and are still making the non-equities bit up to 60%.

Again not counting the general 'global bond' piece, the VLS has 38% of its non-equity allocation in UK, US, Japan and Europe government bonds and 8% of its bonds in UK index linked gilts. This fund has 33% of its non-equity allocation in index linked gilts and nothing else in other government bonds.

So, this portfolio would perform quite differently to a VLS40 across different local and international economic conditions. Whether it or a VLS40 would perform as the OP needs or expects is a different question of course, and the OP seems happy with their own portfolio apart from wondering if they should drop corporate bonds from it. Neither of the portfolios would suit me as I am not a fan of bond indexes and I have more than 40% equity. But I would say the two portfolios are not interchangeable.

A simple allocation, easy to manage and cheap to run.

It is easy to manage a multi asset fund, yes. It is not the specific mix of assets that the OP was aiming for though.

Why pay 0.70% when you can it for less than 0.20%

I don't know.

The VLS fund costs 0.24% plus a platform fee (which might be anything from a few pounds to 0.2% or 0.3% or 0.5% depending on your choice of provider).

Are you suggesting the OP is paying 0.70% for their current portfolio, or less than 0.2%? I don't think they mentioned their fee levels. Are you saying the VLS fund costs 0.70%, or less than 0.2%? The VLS does not cost either of those fees levels.

As they are different portfolios with different underlying holdings it doesn't really matter which one is which price. As Dunstonh mentioned further up, it could be worth paying 0.5% extra fees for a more expensive portfolio solution if the portfolio solution delivered more than 0.5% in extra return (or reduced losses). Getting an asset allocation you are comfortable with, is key.

xemeter

Linton wrote: »

Vanguard LS 40% is 10% UK equities, the OP is 20%. Vanguard LS 40% seems to have negligible property, the OP has 20% at least etc etc. So you arent comparing apples with apples. Perhaps the OP has good reasons for his choices and believes his allocation is superior. Suggest one focuses on what a fund is invested in before considering costs.

Cost is near paramount, it's one of the greatest predictors of returns over the long term.

Suggest one gets a dictionary - similar - doesn't mean identical.

xemeter

bowlhead99 wrote: »

Are you suggesting the OP is paying 0.70% for their current portfolio, or less than 0.2%? I don't think they mentioned their fee levels. Are you saying the VLS fund costs 0.70%, or less than 0.2%? The VLS does not cost either of those fees levels.

With regards to OP:
M&G Strategic Corporate Bond is approx 0.70%, whereas a corp bond index could be had for approx. 0.20%.

bowlhead99 wrote: »

As Dunstonh mentioned further up, it could be worth paying 0.5% extra fees for a more expensive portfolio solution if the portfolio solution delivered more than 0.5% in extra return

Impossible to know ahead of time.

Linton

xemeter wrote: »

Cost is near paramount, it's one of the greatest predictors of returns over the long term.

Suggest one gets a dictionary - similar - doesn't mean identical.

Asset allocation has a far greater effect. Doubling the % UK equities and bringing in 20% property is a bit more than a minor change.

Linton

xemeter wrote: »

With regards to OP:
M&G Strategic Corporate Bond is approx 0.70%, whereas a corp bond index could be had for approx. 0.20%.
.....

Again the funds do rather different things. The M&G fund deliberately changes its investing strategy based on a view of the high level economic situation. The corp bond index fund doesnt.

Bond investing is much more a science than equity investing as with bonds everything of importance is known and largely guaranteed (if one avoids junk bonds) until bond maturity. One doesnt buy bond funds for high returns but rather for stable growth. With that in mind, under current bond market conditions I would be much happier with a managed bond fund able and willing to play with maturity dates and risk/return ratios rather than one based simply on the largest debt.