Good bonds/ bond funds?

Legacy_user

First of all thank you to bowl in particular for the idea of using bonds as a launchpad to sieze the opportunity of an equities crash

I have read that the average crash is 7 years, I'm not sure that justifies a permanent bond holding, but nows definitely the time I feel. I won't sell what I already hold, but I'll either purchase some bonds or keep some cash in it (I want the liquidity to pounce so should it be an ETF or would the commission on a small amount be too much and make cash better? Or maybe a bond mutual fund assuming the crash will last long enough to be a bit slower about it all)

Perhaps bonds of different nationalities to reap potential crashes in different countries?

dunstonh

I have read that the average crash is 7 years,

Average financial crisis is 7 years. Crashes tend to be more frequent on 3-5 year basis.

Perhaps bonds of different nationalities to reap potential crashes in different countries?

You tend to find that fixed interest sector allocations will typically cover gilts, index linked gilts, sterling corporate bonds and global bonds. The amounts allocated to each would depend on the risk profile.

coyrls

MatthewAinsworth wrote: »

First of all thank you to bowl in particular for the idea of using bonds as a launchpad to sieze the opportunity of an equities crash

I have read that the average crash is 7 years, I'm not sure that justifies a permanent bond holding, but nows definitely the time I feel. I won't sell what I already hold, but I'll either purchase some bonds or keep some cash in it (I want the liquidity to pounce so should it be an ETF or would the commission on a small amount be too much and make cash better? Or maybe a bond mutual fund assuming the crash will last long enough to be a bit slower about it all)

Perhaps bonds of different nationalities to reap potential crashes in different countries?

I think you’ve misunderstood Bowlhead’s recommendations but it would be a good idea for other reasons for you to have a cash buffer. Given the amounts we are likely to be talking about I would recommend a high interest current account (e.g. 5% at Nationwide for 1 year) as a lower risk and likely higher return option than bonds and certainly gold.

Thrugelmir

Bonds are just as likely to suffer a correction as equities. Historically fixed interest stocks offered a higher yield. Not in today's upside down world though. The decline has taken 30 years as well. With people currently chasing yield with no appreciation of the risk that they are exposing themselves too.

System

I already have that nationwide account, its just that it'd take a few days for each payment to get cash into the sipp as it has to go through laundering checks and a middle company

Also for tax credit reasons I shouldn't reduce my contributions if I can help it

I don't mind diversified bond risk, I want something that'll surge when people flee equities and ideally still perform decently. I think bonds would be more liquid and negatively correlated to equities than property would

System

Thrug - does that mean bonds aren't better than cash? As don't want bonds to crash at same time as equities

dunstonh

MatthewAinsworth wrote: »

Thrug - does that mean bonds aren't better than cash? As don't want bonds to crash at same time as equities

Bonds went up nearly 20% in a year a couple of years ago. Do you see cash doing that?

Bonds can go down just like equities. However, the volatilty of bonds tends to be lower although some can be just as high. Bond funds are not all low risk. If you take a typical 1-10 risk scale, then you can find bonds in most risk profiles between 2 and 9. They are not all equal.

talexuser

I had several bond funds for many years when started with Peps, between 10 and 20% of the total. They did not grow as much as equities, but did not fall as much during downturns. However that does not mean they did not fall at all. After 15 years or so of Peps and ISAs I grew tired of the relative underperfomance, by that time I reckoned I could weather downturns just fine without ever having to cash anything in, so went 100% equities the past 10 years or so, except for those funds which have a small proportion of bonds in their makeup. Todays' QE artificial pumped market might give different results at the next big fall, who knows.

Joe_Bloggs

What role does the Bank of England play in the corporate bond market?
hint.
I don't understand the motivation behind any of this. Is it necessary for central banks to do this ? Is this a counter-measure to other central banks performing similar roles.
J_B.

System

If bonds are positively correlated to equities, which seems unclear, then maybe I'm better off with property?
Or gold mining equities?

talexuser

Well the recent closure of withdrawals, albeit temporary, showed just how illiquid property funds can be, and gold mining must be right at the top of the risk scale?