Rebalancing equity and bond holding

fcandmp

Many thanks for the suggestions above. To clarify, I do hold some bonds in my SIPP already both in the form of Vanguard life strategy 60:40 and Ishares Ultrashort bonds in lieu of cash. I had thought of rebalancing straight equity funds into the life strategy product but was looking to challenge my options in his instance 

Thrugelmir

barnstar2077 said:

In a recent PensionCraft video he showed that the longterm bonds held up better than anything else surpringly. 

No one is questioning the past. The reasons for the 40 year bull market in bonds is fully understood. The future however is going to be different. Impossible , at the current time, for it not to be. If one is starting to invest today. 

shinytop

fcandmp said:

Many thanks for the suggestions above. To clarify, I do hold some bonds in my SIPP already both in the form of Vanguard life strategy 60:40 and Ishares Ultrashort bonds in lieu of cash. I had thought of rebalancing straight equity funds into the life strategy product but was looking to challenge my options in his instance 

I looked into doing what you're thinking but decided against it.  My 'bond' allocation is whatever HSBC and Vanguard decide to use as the non-equity part of their multi-asset funds.  IMO the problem with bonds is that you're not buying them directly, you're buying units of tradeable bond funds that vary in value just like shares.  Like someone else said, you need to know what you're doing.  

barnstar2077

https://www.youtube.com/watch?v=fdI59Dv3JUg

Pensioncraft just released a video about this very subject.

Linton

barnstar2077 said:

In a recent PensionCraft video he showed that the longterm bonds held up better than anything else surpringly. 

"Held" refers to the past, and yes for a long time the fall in interest rates affected long term bonds much less than short term bonds.  Presumably people believed that everything would be sorted in the medium term.  However longer term bonds are also now on their way towards zero return.

Looking at the data one bond maturing in just under 20 years time originally issued at 4.25% costs £163 giving a yield to maturity of 0.8%. At a capital value of £184 the yield to maturity would be zero - all the interest payable from now to maturity would equal £84.  So there is room for a possible price rise of just 13% before the bond provides a negative return in £ terms. To put that into context, the YTM for 20 year bonds dropped from about 1.65% in the past 2 years

itwasntme001

Whilst long term bonds have "held" their value more than shorter term bonds, because they went up more in price, they experienced more volatility especially during the March 2020 sell-off, because of their longer duration.

Albermarle

barnstar2077 said:

https://www.youtube.com/watch?v=fdI59Dv3JUg

Pensioncraft just released a video about this very subject.

Thanks for posting the video. It was interesting and well explained .
However the previous posts ( and mentioned elsewhere) are noting that the bond market /returns are probably unlikely to behave typically over the next few years , whilst the info in the video is of course all historical. 

barnstar2077

Albermarle said:

barnstar2077 said:

https://www.youtube.com/watch?v=fdI59Dv3JUg

Pensioncraft just released a video about this very subject.

Thanks for posting the video. It was interesting and well explained .
However the previous posts ( and mentioned elsewhere) are noting that the bond market /returns are probably unlikely to behave typically over the next few years , whilst the info in the video is of course all historical. 

Well, this is the problem with investing in a nutshell! :  )

Thrugelmir

barnstar2077 said:

https://www.youtube.com/watch?v=fdI59Dv3JUg

Pensioncraft just released a video about this very subject.

While it's informative I was left wanting more. Nothing contained in the video that hasn't been in the public domain for a while. 

Albermarle

Thrugelmir said:

barnstar2077 said:

https://www.youtube.com/watch?v=fdI59Dv3JUg

Pensioncraft just released a video about this very subject.

While it's informative I was left wanting more. Nothing contained in the video that hasn't been in the public domain for a while. 

I think it is really aimed at investors with less experience than you . More for the reasonably well informed but amateur types, like me !