My uncle has advised me to sell all my shares and reinvest in bonds/gilts

zagfles

Lois_and_CK wrote: »

He has predicted an imminent stock market crash. His prediction is based on the LIBOR rating. He says the last time it was at this level was just before the 2007/2008 crash. He is in the process of selling his shares and putting the money into bonds/gilts instead.

So he can predict stock market crashes! He's obviously a billionaire. Why's he buying bonds, why isn't he shorting equities?

zagfles

ValiantSon wrote: »

Is your uncle a regulated independent financial adviser?

As if an IFA could predict a crash any better than the rest of us...

mark55man

I think an IFA could help structure a portfolio that mitigates the consequences of such an event - that's about as far I would go though

[Deleted User]

lol, we never looked back after sacking the ifa, who looked after my husbands company pension for a year (spratt to catch a mackerel) and wanted hedge funds, ifa managed sipp and a big fat fee with a money trail. He didn`t know that I am a canny savvy lass. Appearances are deceptive, my brain is made from physics and charts and yes I can knit



My husband retired and had to withdraw the pension from the company fund. It took courage from me and faith from my husband, I studied, took on management of his pension, transferred to a sipp, dealt with A day, vested it etc. Best of all I made it grow and it more than doubled in size. Widowed 3 years ago and now transferred to me and asset allocation has changed to reflect my older age. I had much experience in share trading on a personal level, went on courses etc


So yesterday morning I sold all shares to wrap up profits and actually did buy gilts for a portion of the my sipp. Already up in value today. I once bought lots of gilts in the sipp, in the past, got income and then sold at a big profit. The income and stability suit me at my age, not for everyone. Just being open about what I did I would say to all, Dyor

Frugal_Financial_Freedom

My day job involves working with bond markets - I would echo what others have said here that it is a bad idea to buy bonds right now, let alone sell out of equities to do it.

Central bank bond buying has pushed down the yield of bonds, and pushed the price of them sky high. Top rated government bonds in the Eurozone are still paying 0% yield or less up to 6 years and 6 months, according to the European Central Bank.

I'm not allowed to post links yet but it's easily googlable.

While top rated European names are the most affected in terms of negative yields, this reduction of yield (and rise in price) has happened across the entire bond market, with the exception of some of the riskier high yield companies with the sort of capital structure that will make your eyes bleed to look at or basket case emerging markets

Rising interest rates, which will increase Libor and Euribor rates because it will cost more for banks to borrow overnight (I'm paraphrasing for brevity but that's the general idea), will lead to bond prices going down and yields going up.

This means that people buying bonds now will have bonds that are worth less once rates rise.

I'm not a IFA or anything, just my two ps worth. But I'm staying clear of bonds for now for the reason above. If you wanted to preserve capital then I guess switching to bonds makes sense...

ChopperST

Frugal_Financial_Freedom wrote: »

This means that people buying bonds now will have bonds that are worth less once rates rise.

That's the big if though isn't it?

The Vanguard UK Gov Bond fund jumped nearly 1% and the Inflation linked gilt fund over 1% yesterday in response to the political turmoil in the Eurozone.

There's more to bonds than simply interest rates to most retail investors.

atush

takesyourchances wrote: »

Didn't the 2008 crash recover for those who stuck to their strategy and held through it. Don't think guessing is a great strategy and market timing

That was my experience.

I was in france during the beginnings of the major crash with a radio for the news but no internet to do any dealing. Just as well, it all recovered in the end, and contributions during the crash gave me a whole lot of extra shares due to low priced (ie pound cost averaging). So basically, I just didnt do anything.

atush

bostonerimus wrote: »

Your uncle is being foolish. Selling shares and going into bonds/glits right now has a high probability of producing capital losses over the next 5 to 10 years as interest rates are almost certain to rise. Of course I could be just a wrong in that analysis as your uncle might be in his. So play the percentages and keep yourself diversified across asset classes....you are being sensible with your VLSxx investment.

QE and low interest rates have put bonds into a bubble situation.

MK62

atush wrote: »

QE and low interest rates have put bonds into a bubble situation.

Some might say the same for equities too...;)

Tealblue

Nod. Smile. Do nothing.