Creating the non equity part of your portfolio

Ceme3000

Can anyone point me in the right direction please for the best approach to creating the 40% of a 60/40 SIPP. Are there any decent multi sector bond funds to consider? Would it be a bad thing to have everything in one or two strategic bonds? Or should I mix global gilts, corporate bonds, emerging market bonds etc? How about a fund that just follows a bond index? What about a bit of property in the mix?

There seems to be lots of information available for equities but not so much for bonds. If there are any decent articles I could read online, please let me know. Thanks

bostonerimus

If you are in this for the long term a bond indexes like Vanguard Global Bond index or UK Investment Grade Corporate can be used...or just buy something like VLS60 and you have your 40% fixed income. You might want to have 10% in REITs, or maybe use some money to overpay the mortgage and should also have emergency cash.

jamei305

I decided that unlike equities, I don't really know enough about bonds/property/commodities etc. I don't even know if a passive option would be suitable.

I have therefore entrusted the management of that part of my portfolio to an investment trust (Capital Gearing Trust), so I now have 80% equity funds, 20% CGT.

Aminatidi

jamei305 wrote: »

I decided that unlike equities, I don't really know enough about bonds/property/commodities etc. I don't even know if a passive option would be suitable.

I have therefore entrusted the management of that part of my portfolio to an investment trust (Capital Gearing Trust), so I now have 80% equity funds, 20% CGT.

I do something very similar but I spread across Capital Gearing Trust, Personal Assets Trust, and Ruffer Investment Company with Capital Gearing Trust being the largest single holding I have @ around 35%.

I tend to think of that part of my allocation more in terms of "low volatility/risk" than "equity or non-equity" and all three as somewhere where over the long term I shouldn't have any sleepless nights.

Prism

The non equity part is ideally supposed to behave differently to the equity part. Here are some options I use

Cash/FSCS protected bonds split across instant access / 1yr / 2yr / 3yr accounts. Be careful of tax on higher amounts.

P2P. I keep this below 5% in total

Passive intermediate duration global government bond funds, possibly hedged to GBP. I currently have a little in 2 ETF's IGLH and XGIG.

I would consider strategic bond funds and wealth preservation trusts as the others have mentioned but currently have none. Also premium bonds for higher levels of cash.

Linton

In the times long ago, pre 2007, one would simply use gilts for safety alongside equity as their price variation was relatively low and independent of equity prices and the returns moderate but useful. This simple solution no longer applies. So one has to devote similar effort to one's non-equity portfolio as to the equity tranche. As with equity, diversification is important.


Your options are to hold a number of different types of bond and other asset funds, to rely on a fund manager to choose appropriate bonds or to invest in funds/unit trusts with the same objective of diversifying away from 100% equity as you have.


I hold Jupiter Strategic Bond fund and Trojan O, Ruffer IT, RIT (RCP) wealth preservation funds and also treat my Prudential With Profits holding as part of the same tranche. A key criterion in choosing the funds was how they performed during the 2008 crash. Although the crash is now outside the 10-year data period commonly found on the net one can use Trustnet-Tools-Charting to see what happened.

Aminatidi

Capital Gearing Trust is an interesting one and I'd encourage anyone to look at their portfolio and holdings.

I know I don't have a hope in hell of constructing anything like that because I don't have the knowledge they do and I certainly don't know about (for example) German residential property or some of the other things they consider opportunities whilst also remaining cautious enough to sleep well.

Albermarle

Also with an OCF of 0.7% and minimal platform charges , if you have a platform that caps charges on Investment Trusts . So not expensive for a managed investments, especially if you buy and hold so the effect of trading charges and bid/offer spreads is minimal

Ceme3000

Thanks for the various suggestions. Looks like I'll be on Trustnet doing a bit of research!

Crashy_Time

https://www.amazon.com/Inside-Yield-Book-Classic-Analysis/dp/111839013X

A_T

Gold, property and government bonds