dividend yield vs distribution yield & Choice of acc or inc funds/etf

Bravepants

I've never seen the appeal of gilts, fair enough buying them at issue, but the secondary market leaves me thinking "What on Earth is the point?"

Gary1984

Probably not much point for individual investors like us when you can just open a Marcus account and get better rates and full FSCS protection up to £85k.  For institutional investors like an insurance company that need a secure home for their money and don't have the option of bunging it all into a Marcus account then gilts are really the only option.

If anything you're exposed to more risk holding gilts than cash, particularly those of longer durations as their value will fall when interest rates rise.  

Linton

Bravepants said:

I've never seen the appeal of gilts, fair enough buying them at issue, but the secondary market leaves me thinking "What on Earth is the point?"

Generally the point for small investors is that they provide a return as interest independently of equities.  Once you buy a gilt whether at par or some different value the income in £s you receive per year is guaranteed until maturity.  This means that gilts provide useful diversification for equity.

However if you were buying gilts now the income you guarantee would be minimal and you would have the risk of long term reduction in capital value, so I believe cash or perhaps some other non-volatile assets are more attractive.

AIUI all new gilts are now auctioned so you can never buy at par excpt by chance.

port_of_spain

I have a little in a long-term gilts fund, and it's done what one might hope in this crisis, i.e. actually gone up when most things have been going down. I absolutely wouldn't suggest long-term gilts as an investment by themselves. A small amount in long-term gilts, along side a much larger amount in equities, can make sense.

I agree that short-term gilts have little point for retail investors, because they don't go up or down so much in value, so we might as well stick to retail savings accounts instead.

masonic

It usually comes down to being forced to invest cash in order to get any sort of return in your investment account of choice. I've discovered that a transfer from a cash ISA to a S&S ISA can take quite a long time in the current climate, so it is good to have something low risk I can sell and have the proceeds ready to reinvest in something higher risk the next day. But my preference for the 'bonds' part of my portfolio is a low risk multi-asset fund holding some gilts, alongside international government bonds, index linked bonds, corporate bonds and perhaps a dash of something a little racier.