Some very basic vanguard bond advice please

MDMD

guitaro said:

Thanks a lot for the reply! I think I'm putting the most I can already into my pension ... 

How much are you putting into your pension? Don’t confuse what your employer says is the maximum they will match to what you are allowed to pay in. 

You can get tax relief on far more (the exact amount depends on your income) than an employer usually matches which would cushion any volatility a little.

MX5huggy

Don’t invest in that for crash protection, read up on active vs passive. Crash protection is provided by bonds, you need to pick your risk level and then pair that with your bond allocation. 

That funds fee is twice Life Strategy, what’s aim is it worth it? 

Thrugelmir

Are you comfortable with the potential volatility of VLS80, have you considered switching your investment entirely into VLS60?  That way you'll gain broader bond exposure. 

guitaro

Thanks guys, really appreciate all of this advice and view points ... 

It's a good point thinking about the LS60 ... I think I am comfortable with the ongoing regular deposits of £250 into LS80 on top of the £500 I put in. I don't think I could put a big chunk into it though, it's just psychological for me. Maybe that's a really silly way of thinking from me though and I actually will feel differently when it drops!

I definitely am buying into the whole invest for the long term thing though, probably like everyone, I definitely wish I'd looked into it earlier! I'll keep with the LS80 for now, but maybe also consider some money in another LS fund. 

Thanks again, really helped me not just invest in the bond thinking it was pretty much just safe!

MX5huggy

What you are talking about is dollar cost averaging vs lump sum investment. If your investment horizon is decades then it makes little difference and mor often than not is not best. 

bostonerimus

There a few indicators that mean the bond fund you've chosen will be low risk, 1) its with a reputable company ie Vanguard. 2) it is "short term" meaning that it's price won't change greatly with interest rate fluctuations. 3) It is "investment grade" so it holds high quality bonds that you are basically certain will be repaid.

guitaro

Thanks fellas, all great stuff for me to think about!

aroominyork

Investing emergency cash in bonds can be a dangerous strategy - you are trying to get a slightly better rate than a savings account but risk needing to liquidate your investment during a slump. There is a saying about picking up pennies in front of a steamroller.

Here are a couple of charts showing the Vanguard fund and a couple of other bond funds at the safer/short-term end of the bond spectrum. One chart goes back to 2015, the other begins on the day in early March 2020 when, a week after shares began their Covid-related fall, bonds followed. I hold Royal London Short Duration Credit which fell 6%, but it is as part of my bond allocation and not for cash I might need to access quickly. (Enhanced Cash Plus does not do what it says on the tin - it mostly invests in bonds.)