equities / bonds - investment strategy

Prism

Deleted_User wrote: »

It’s not a “£4 return every year for 40 years”. Return depends on several factors, such as future interest rates, and cannot be predicted.

Linton was originally talking about 'a' bond rather than a bond fund. Committing to a 40 year duration for a roughly 2% return is a pretty big risk yet thats what the bond market does. Bonds and bond funds might well continue to make a positive return but there is a pretty high risk that they won't

[Deleted User]

Prism wrote: »

Linton was originally talking about 'a' bond rather than a bond fund. Committing to a 40 year duration for a roughly 2% return is a pretty big risk yet thats what the bond market does. Bonds and bond funds might well continue to make a positive return but there is a pretty high risk that they won't

Correction: for a 2% bond coupon rate. Words matter. Return is unknown. Many bonds with a 2% coupon rate in December 2018 had 15% return in 2019.

Also, when you buy a long term bond, you are not committed to actually holding it to maturity.

I totally agree that bonds carry a risk. All securities do.

Prism

Deleted_User wrote: »

Correction: for a 2% bond coupon rate. Words matter. Return is unknown.

I was referring to Linton's example which was a 4% coupon rate but at roughly twice the original price for the bond.

Also, when you buy a long term bond, you are not committed to actually holding it to maturity.

Yes I am aware, however all things being equal you are more likely to make pretty much what the return on the bond suggests you will make - in this example around 2% per year

Bonds are very poor value at the moment considering their scope for a price improvement which is the only way that they will do better than cash. It might happen but its not the easy choice safety net that it used to be

[Deleted User]

Prism wrote: »

Bonds are very poor value at the moment considering their scope for a price improvement which is the only way that they will do better than cash. It might happen but its not the easy choice safety net that it used to be

That’s not a fact. That’s an opinion. We’ve seen this opinion expressed routinely for several years. So far it has been wrong. Maybe there is a bubble in bonds. We would only know after it bursts. We don’t know the future.

Filo25

Deleted_User wrote: »

That’s not a fact. That’s an opinion. We’ve seen this opinion expressed routinely for several years. So far it has been wrong. Maybe there is a bubble in bonds. We would only know after it bursts. We don’t know the future.

I made a few quid on bonds last year as well, that still doesn't stop being very nervous holding anything long dated at present, personally I'mnot sure the risk/reward trade off is really there.

But that is the problem with the low return world we are now living in, safe haven assets basically pay nothing in nominal terms so you need to take on rapidly rising risk to generate even modest yield. Still looking for assets to better diversify my portfolio.

Thrugelmir

Deleted_User wrote: »

Also, when you buy a long term bond, you are not committed to actually holding it to maturity.

Where would you invest the proceeds of your 15% gain in 2020 ? That guarantees a fixed return and does not put your capital at risk.

Thrugelmir

waveydavey48 wrote: »

Do many forum members now think he's wrong?

When did he write his book?

Thrugelmir

Filo25 wrote: »

I made a few quid on bonds last year as well,

Have you sold the holding, or is this a purely notional paper profit?

Filo25

Thrugelmir wrote: »

Have you sold the holding, or is this a purely notional paper profit?

Some sold, some continuing to be held, have dialled back my bond allocation a bit this year

[Deleted User]

Thrugelmir wrote: »

Where would you invest the proceeds of your 15% gain in 2020 ? That guarantees a fixed return and does not put your capital at risk.

Nothing guarantees a fixed return. All forms of investment put capital at risk. I am always 100% invested. My money weighted return for 2019 was not 15% but 20%. However 1 year numbers are not all that meaningful. I invest my gains in accordance with my IPS.