Bonds in a pension portfolio

Aged

I understand that bonds are out of favour these days. So, if you already hold bonds in your portfolio should you be getting rid of them? 

MX5huggy

Why do you think bonds are out of favour? They’re the none glamorous side, every football team has centre backs. 

Vanguard Life Strategy has 5 options all but one hold significant bond percentages. There’s £10billon plus in LS 60 (that has 40% bonds) compared with just £2.8b in LS 100 (no bonds).
What bonds do you hold?

masonic

Do you already have an answer to the question: what should you invest in instead of bonds? There isn't any point deciding you should get rid of them if you have nothing to replace them with.

Aged

masonic said:

Do you already have an answer to the question: what should you invest in instead of bonds? There isn't any point deciding you should get rid of them if you have nothing to replace them with.

That was my next question. 

masonic

Aged said:

masonic said:

Do you already have an answer to the question: what should you invest in instead of bonds? There isn't any point deciding you should get rid of them if you have nothing to replace them with.

That was my next question. 

If you get an answer to that question, I'd be interested to know, because to the best of my knowledge there is nothing you could hold in a pension with equivalent risk and higher returns than bonds.

Linton

Presumably you are investing in some particular type of bonds to achieve some objective. If we knew the type of bonds you were using and why we could discuss whether under current circumstances those bonds would actually be likely to meet the objective and if not perhaps could suggest alternative investments.

JohnWinder

What does your investment policy statement say, written some years ago, updated, refined with new knowledge, and the basis for your financial planning? Does it say 'I listen to the chit-chat, and despite not really knowing what other people are actually doing, I let the chit-chat guide me'?

Or does it say 'there are times when yields on stocks and bonds are lower than at other times, but we either part own a business or we lend to it to share in its prosperity; there seems no other way to get any benefit from it unless you work for it'?

Lastly, what better securities are there for providing certainty against inflation than inflation linked government bonds?

I'd say 'hang in there', which is what many sensible people would suggest, but I have no idea how any choice would play out in future, so you'll have to decide without my advice.

Aged

JohnWinder said:

What does your investment policy statement say, written some years ago, updated, refined with new knowledge, and the basis for your financial planning? Does it say 'I listen to the chit-chat, and despite not really knowing what other people are actually doing, I let the chit-chat guide me'?

Or does it say 'there are times when yields on stocks and bonds are lower than at other times, but we either part own a business or we lend to it to share in its prosperity; there seems no other way to get any benefit from it unless you work for it'?

Lastly, what better securities are there for providing certainty against inflation than inflation linked government bonds?

I'd say 'hang in there', which is what many sensible people would suggest, but I have no idea how any choice would play out in future, so you'll have to decide without my advice.

Erm, what?

bostonerimus

Interest rates are low and if they go up bond prices will fall. If you hold to maturity you'll get your interest and principal back. If you own bonds in a multi-asset fund you'll have a mix of maturities, some inflation linked, Government and corporate of various qualities. They are there to manage volatility and produce gains over the long term ie.10, 20, 30 years. 

Albermarle

Interest rates are low and if they go up bond prices will fall.

In some areas they have already fallen, presumably in anticipation of inflation/interest rate rises.

howard3844

It is a question a lot of people are asking. as said before the price of existing bonds have already reduced to take into account future expectations of inflation / interest rates, so no real reason in selling them ... Nobody knows if rates are going to go up or down  .. If in a multi asset fund with say vanguard LS, the rise in equities should more than compensate ? This is a general view not knowing your circumstances.