Bonds advice required.

letspretendforaminute

I have two SIPPs fully invested (value £150k combined) and one Fund account with the same provider (value £150k) £85k of this is invested and the remainder is held in cash, what’s the best mix of bonds to hold assuming I don’t need to access this for two years. Not looking to beat inflation but hold onto most of its purchasing power.

Thank you

Linton

For two years cash is the best option. As to bonds , it depends what you mean by bonds. Banks use the term “bond” for a fixed rate, fixed term savings account. True bonds are loans to the government or companies. If your timescale is as small as two years anything other than savings accounts has a pretty good chance of losing as much money as it’s likely to make.

aberlyfid_2000

for UK bonds, most of the yields on good quality bonds are below inflation: the 10Y yield is 1.5%, and with current CPI, this is -1.5%. Corporate bonds give slightly better yields, but its best to stay away from bonds that yield too highly!

That's not to say that bonds don't play a part in a portfolio. If you are willing to take dollar risk, you can get better yields. There's inflation linked bonds, which are quite useful to have and might appreciate in value, depending on how (un)well inflation is under control.


instead of buying bonds individually, there's plenty of funds out there, depending on what you chose to do. iShares ETFs have a wide range of choices, and their website is well worth a look.

Tom99

I think bond values are more likely to show a loss over two years so I would stick with cash.

aberlyfid_2000

that could be - longer term interest rates could rise, but we have been pondering that for years now !

agreed, cash or near cash ( bonds with shorter maturities) could be viable alternatives, and should form a large part of a SIPP portfolio that is close to maturity.

Equities on the other hand are due for a massive fall.

System

With the end of quantitative easing in the US, I would be more concerned about bonds than equities. The best mix of bonds is none. See: https://www.ft.com/content/da00a8e2-db43-11e7-a039-c64b1c09b482