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

ivormonee

People do predict all sorts of things, based on their own personal interpretations of all sorts of economic and statistical measures. For every person who predicts a "crash" (even the definition of which varies quite dramatically depending who you speak to) there is another who predicts the opposite.


The best thing to do is look at a variety of economic and market indicators, taking note of things like sentiment, and reach your own conclusions on market levels. Markets generally overreact and then revert to some sort of mean. Making a simple comparison to LIBOR rates and reaching such a significant conclusion solely on that indicates to me a lack of understanding of investment.

[Deleted User]

Malthusian wrote: »

You will be disappointed when you get your first coupon and find they pay you only 3.1% and 2.7% steady income respectively. Every £1,000 you invested in a 2038 gilt will pay £30.10 each year, .

Doh!!! we are not all fuffy headed. The number of UNITS x the %.

That was terribly condescending, that post of yours and no I will get exactly what I have calculated, exactly why I made the sipp such a success, I understand maths. I have an active brain and a physics degree. Don`t make assumptions about me or the way I have calculated income

and notice I did say INCOME and not YIELD. I never mentioned yield at any point

ValiantSon

zagfles wrote: »

Hmm...maybe I should have been as concise as masonic :rotfl:

No, you should have been as accurate.

coyrls

kittie wrote: »

Doh!!! we are not all fuffy headed. The number of UNITS x the %.

That was terribly condescending, that post of yours and no I will get exactly what I have calculated, exactly why I made the sipp such a success, I understand maths. I have an active brain and a physics degree. Don`t make assumptions about me or the way I have calculated income

and notice I did say INCOME and not YIELD. I never mentioned yield at any point

So your "4.25 and 4.75 income" is 4.25% and 4.75% of what?

StevieJ

kittie wrote: »

Doh!!! we are not all fuffy headed. The number of UNITS x the %.

That was terribly condescending, that post of yours and no I will get exactly what I have calculated, exactly why I made the sipp such a success, I understand maths. I have an active brain and a physics degree. Don`t make assumptions about me or the way I have calculated income

and notice I did say INCOME and not YIELD. I never mentioned yield at any point

To be fair it was useful to highlight the difference between yield and income for the uninitiated.

Malthusian

kittie wrote: »

Doh!!! we are not all fuffy headed. The number of UNITS x the %.

That was terribly condescending, that post of yours and no I will get exactly what I have calculated, exactly why I made the sipp such a success, I understand maths. I have an active brain and a physics degree. Don`t make assumptions about me or the way I have calculated income

It is not condescending to point out that you have calculated income incorrectly. The income you receive from an investment is the yield. 4.25% and 4.75% have virtually no relevance to you. They're the investment equivalent of the engine size on a vehicle in litres. It tells you absolutely nothing without further information (price of the units / size of the vehicle).

If you just wanted someone to say "wow, that sounds like a great investment" you should have told your husband about your long-dated gilts, not an open forum.

If you understood the way the yield worked you would have said "I'll be glad of the steady 3.1% and 2.7% income, and I don't mind that some of that is my own money being paid back to me because that will be my heirs' problem, probably". Not "I'll be glad of the steady 4.75% and 4.25% income". There is no 4.75% and 4.25% income to be had, unless you can travel back in time and buy the gilts when they were launched at £100.

bostonerimus

I think the conversation about coupon vs yield is a useful one. Many people will look at long term gilts/bonds and see a coupon of 4% and think that they are getting 4% interest each year when in fact they need to be looking at the yield which will be lower than the coupon by a factor determined by the premium you paid.....in this case 4.75/153 = 3.1%.....and the payment they get at maturity.

It's similar to the issue with annuities. People will look at an annuity payout rate of say 5% and think they are getting 5% interest, not understanding that a lot of that payment is just repayment of your own capital and that the underlying rate of return assuming an average life span might be 1% or 2%.

Thrugelmir

bostonerimus wrote: »

It's similar to the issue with annuities. People will look at an annuity payout rate of say 5% and think they are getting 5% interest, not understanding that a lot of that payment is just repayment of your own capital and that the underlying rate of return assuming an average life span might be 1% or 2%.

Annuities are pooled risk. No one has an average life span. Just a cotton thread that could snap at any time. For those that live for many years the guaranteed return is of benefit. I have no wish to be trading in several decades time.........

Government 10 year debt currently offers less than 1%, quality corporate debt 2.5%. A yield over 5% shouldn't be discounted. Particularly as the low interest era continues unabated.

bostonerimus

Thrugelmir wrote: »

Annuities are pooled risk. No one has an average life span. Just a cotton thread that could snap at any time. For those that live for many years the guaranteed return is of benefit. I have no wish to be trading in several decades time.........

Well some people do have an average lifespan, it's just impossible to know if you will be one of them, and most people will have a lifespan quite close to the average, but I get your point. If you live long enough annuities end up being worthwhile, just like other forms of insurance that you collect on. Still many people see a 5% payout rate and think they are getting 5% annual interest and so can make bad choices. The same goes for anyone expecting a 4.25% return from a 4.25% coupon 20 year gilt held to maturity; googling I see the maturity yield is 1.6%. Of course if someone want's an safe place to stash cash, get a little bit of interest, a regular stream of payments, retain access to principal and doesn't want the longevity insurance of an annuity, then a long term gilt would work.

[Deleted User]

At least people are now talking about the difference between yield and income. My income has just increased by over 6k a year, yes you can work out what I spent. I would be assured of that over 20+ years, however I can see me selling if there was a big fat profit ahead, already up by 1k and better than cash in a sipp.:D As I said, the redemption yield does not concern me at all as my children and grandchildren will inherit whatever I have in the sipp when I pop my clogs



There is no substitute for looking after your own financial afairs and pension, just do the research, it is not rocket science. Remember to diversify, never risk what you cannot afford to lose and change strategy as old age looms always with an eye on world markets and stability