What Multi Asset Funds

Random47

Wife commented that she is very nervous with investing so explain VG LS 20 & 40 and Bonds / Gilts as best I could, which is why I looked at VG bonds and gilt funds here:
https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/summary.page?idtype=ISIN&fundid=IE00B1S75374&UseProxy=Yes&fundname=Vanguard U.K. Government Bd Idx GBP Acc&UserChannel=Direct
and
https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/summary.page?idtype=ISIN&fundid=GB00B4M89245&UseProxy=Yes&fundname=Vanguard U.K. Long Dur Gilt Idx Acc&UserChannel=Direct
The graphs show a fairly nice upward line, my point is what is this representing? The performance says 20% etc, but as Bonds & Gilts only pay set rates 1-5% I'm a bit confused. where would I find the rate the bond is paying?
Was thinking about at VG LS 40 and a VG Bond for her. mmm.

bigadaj

Random47 wrote: »

Wife commented that she is very nervous with investing so explain VG LS 20 & 40 and Bonds / Gilts as best I could, which is why I looked at VG bonds and gilt funds here:
https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/summary.page?idtype=ISIN&fundid=IE00B1S75374&UseProxy=Yes&fundname=Vanguard U.K. Government Bd Idx GBP Acc&UserChannel=Direct
and
https://www.fidelity.co.uk/investor/research-funds/fund-supermarket/factsheet/summary.page?idtype=ISIN&fundid=GB00B4M89245&UseProxy=Yes&fundname=Vanguard U.K. Long Dur Gilt Idx Acc&UserChannel=Direct
The graphs show a fairly nice upward line, my point is what is this representing? The performance says 20% etc, but as Bonds & Gilts only pay set rates 1-5% I'm a bit confused. where would I find the rate the bond is paying?
Was thinking about at VG LS 40 and a VG Bond for her. mmm.

The rate of the bonds on that example is the distribution yield. As a bond fund then this will be the average rate of the large number of bonds they hold. The total return is this, but primarily the variation in the value of the bonds, which vary in terms of supply and demand and relative to interest rates and returns from other assets as I've described above.

Traditionally a fund heavy in bonds would be seen as conservative and safe, but many now think that if and when interest rates rise then this will lead to large drops in the value of many bonds, so be wary.

Random47

Ok, I think I'm getting some of it.
So as the bond prices have went up (over initial release) this results in higher returns for the existing bond holders. The new bond holders get a diluted return on the guaranteed interest as they have paid x% over the 100(baseline). Therefore new buyers need to hope there are more buyers coming in behind them to keep the NAV yield up.
Then when the bond price drops like a stone you get less than what you paid if you sell (loss) or if bond kept to maturity you get the original bond value paid, but this is less than what you originally 'overpaid' for bond (again loss).
Definitely food for thought.