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

MK62

bostonerimus wrote: »

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%.

This does of course depend on when you buy it - I think the Gilt in question is a 30yr Gilt issued in 2008 at £1 PAR, which obviously still has 20yrs to run...


If it was bought back in 2008, then the figures would look quite different to if it was bought today.
With hindsight, I'm sure we'd all have piled into these 10 yrs ago, but alas the ship has sailed on that......now where have I heard that before.....;)

Malthusian

MK62 wrote: »

If it was bought back in 2008, then the figures would look quite different to if it was bought today.
With hindsight, I'm sure we'd all have piled into these 10 yrs ago

Actually the 2038 4.75% gilt was launched in 2004, and it's highly doubtful that any of us would have piled in, because the Bank of England base rate at the time was 4% and you could easily get 5%+ from easy access cash accounts with no risk to capital, if I remember correctly. (checks the very first page of this forum - yes I do.)

Even if it had been launched in 2008, it would have been a pretty poor investment for anyone willing to risk their capital, because 2008 was near the bottom of the market and a diversified portfolio of equities would have returned substantially more than 4.75% with virtually no risk of permanent and total loss.

MK62

Well I only quickly looked at the 10yr chart which showed the price at around 100 in 2008.....so fine it was launched in 2004.

Not that it makes much difference to the point I was making.......you seem to have ignored the "With hindsight" bit.........I know we wouldnt have piled in back then.....I didn't.....but WITH HINDSIGHT I would have enjoyed a 4%+ very low risk income stream over the last 10yrs, while enjoying a healthy capital increase at the same time....perhaps you wouldn't and that's fine by me.

bostonerimus

MK62 wrote: »

This does of course depend on when you buy it - I think the Gilt in question is a 30yr Gilt issued in 2008 at £1 PAR, which obviously still has 20yrs to run...


If it was bought back in 2008, then the figures would look quite different to if it was bought today.
With hindsight, I'm sure we'd all have piled into these 10 yrs ago, but alas the ship has sailed on that......now where have I heard that before.....;)

Yep, price and today's interest rates are key.

bostonerimus

kittie wrote: »

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

I could not be as sanguine to lock in 1.6% return if held to maturity and I've never been able to get excited about return of capital. However, if you are very risk averse and capital preservation is important to you then long term gilts held to maturity are a good vehicle. If I was doing this I'd probably look at a bond or savings bond ladder. I'd take 5 or 10 years of spending and create a bond/savings bond ladder to mature each year and cover my spending. I'd use equity returns to extend the ladder in good years. Personally I've used an annuity for long term income and I stick with intermediate term bond funds as a small part of my portfolio as I'm going to hold them through interest rate ups and downs and reinvest the interest.

capital0ne

Lois_and_CK wrote: »

He was impressing upon me and other 'young ones' in the family to get out while we can.

As you are the young ones, you have time on your side, stay invested and just ride the peaks and troughs, selling out would be ridiculous, OTH oldies may be advised to follow this methodology, but again just staying invested is the best thing in the long term - long term being the clue - i.,e. youngster, anyone below the age of 50 in my case being a 67 yr old, and I'm staying invested.

Good luck

kidmugsy

DairyQueen wrote: »

is it just late and I've had one too many glasses of Aspalls?

A fellow Aspalls connoisseur: hurray. (Or should it be connoisseuse?) A couple of their bottles are on offer at Waitrose at the mo': that's surely a legit MSE remark?

TBC15

That puts 7% returns in a whole new light.