Gilts Understanding

SavingStudent1

masonic said:

SavingStudent1 said:

Yes, I think you are right - I am just worried sometimes because most of the banks that offer the best deal are ones I have never heard off, like high-street banks as HSBC, NatWest, Santander etc.. and I am just worried about that. I don't really know much about reliability and banks in general, so I only deal with the well-known ones lol.

Check they have FSCS protection, if so your money is just as safe as if held anywhere else provided you stay below the compensation limit.

Thank you! So, for example, is that the money in the savings account or the amount you initially invested? For example, it seems like the compensation limit is £85,000.

So, do I sort of need to ensure that I invest £85,000 or the maximum in my account at any time is £85,000 to ensure I get fully compensated?

So, for example, if the interest rate is 2% based on MSE website with JN Bank - it says on the website, 2.00% gross AERⱡ fixed, if I invested: £76987.11, then after 5 years, I'll have: £76987.11 * 1.02^5 = £85,000 and so at any time if it defaults, I should get fully compensated?

SavingStudent1

ColdIron said:

SavingStudent1 said:

Yes, I think you are right - I am just worried sometimes because most of the banks that offer the best deal are ones I have never heard off, like high-street banks as HSBC, NatWest, Santander etc.. and I am just worried about that. I don't really know much about reliability and banks in general, so I only deal with the well-known ones lol.

High St banks, almost without exception, offer the worst rates on the market. I have been using the challenger banks for over 10 years and many of them have been running for longer than that. If they have FSCS protection your money is no less safe

+

Gilts are auctioned to the highest bidder so you cannot buy at face value

That is so true lol, by challenger banks, do you mean the ones we mentioned that are FSCS protected but not the High St ones?

Ah I see, so I guess gilts is not really worth it unless you make profits by 'buying cheap' and 'selling high' really...

masonic

SavingStudent1 said:

masonic said:

SavingStudent1 said:

Yes, I think you are right - I am just worried sometimes because most of the banks that offer the best deal are ones I have never heard off, like high-street banks as HSBC, NatWest, Santander etc.. and I am just worried about that. I don't really know much about reliability and banks in general, so I only deal with the well-known ones lol.

Check they have FSCS protection, if so your money is just as safe as if held anywhere else provided you stay below the compensation limit.

Thank you! So, for example, is that the money in the savings account or the amount you initially invested? For example, it seems like the compensation limit is £85,000.

So, do I sort of need to ensure that I invest £85,000 or the maximum in my account at any time is £85,000 to ensure I get fully compensated?

So, for example, if the interest rate is 2% based on MSE website with JN Bank - it says on the website, 2.00% gross AERⱡ fixed, if I invested: £76987.11, then after 5 years, I'll have: £76987.11 * 1.02^5 = £85,000 and so at any time if it defaults, I should get fully compensated?

Yes, you understand correctly, keep the balance under the limit at all times. You can spread your money around (unconnected) savings providers to avoid going over the limit. It would be unusual for someone to need to hold that sort of money in cash over the long term (sometimes it is necessary to do so temporarily).

ColdIron

SavingStudent1 said:

ColdIron said:

SavingStudent1 said:

Yes, I think you are right - I am just worried sometimes because most of the banks that offer the best deal are ones I have never heard off, like high-street banks as HSBC, NatWest, Santander etc.. and I am just worried about that. I don't really know much about reliability and banks in general, so I only deal with the well-known ones lol.

High St banks, almost without exception, offer the worst rates on the market. I have been using the challenger banks for over 10 years and many of them have been running for longer than that. If they have FSCS protection your money is no less safe

+

Gilts are auctioned to the highest bidder so you cannot buy at face value

That is so true lol, by challenger banks, do you mean the ones we mentioned that are FSCS protected but not the High St ones?

Yes. See below for a good selection

https://www.hl.co.uk/investment-services/active-savings
https://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html
https://moneyfacts.co.uk/savings-accounts/

SavingStudent1

masonic said:

SavingStudent1 said:

masonic said:

SavingStudent1 said:

Yes, I think you are right - I am just worried sometimes because most of the banks that offer the best deal are ones I have never heard off, like high-street banks as HSBC, NatWest, Santander etc.. and I am just worried about that. I don't really know much about reliability and banks in general, so I only deal with the well-known ones lol.

Check they have FSCS protection, if so your money is just as safe as if held anywhere else provided you stay below the compensation limit.

Thank you! So, for example, is that the money in the savings account or the amount you initially invested? For example, it seems like the compensation limit is £85,000.

So, do I sort of need to ensure that I invest £85,000 or the maximum in my account at any time is £85,000 to ensure I get fully compensated?

So, for example, if the interest rate is 2% based on MSE website with JN Bank - it says on the website, 2.00% gross AERⱡ fixed, if I invested: £76987.11, then after 5 years, I'll have: £76987.11 * 1.02^5 = £85,000 and so at any time if it defaults, I should get fully compensated?

Yes, you understand correctly, keep the balance under the limit at all times. You can spread your money around (unconnected) savings providers to avoid going over the limit. It would be unusual for someone to need to hold that sort of money in cash over the long term (sometimes it is necessary to do so temporarily).

Oh yes, thank you! So, made up scenario: suppose I had 4 different banks that give me 2% interest on a 5-years fixed rate savings account, if I had £307,948.44 (= £76987.11 * 4), then could I now invest £76987.11 into 4 separate accounts so that at the end of the 5 years, I earn £85,000 from each of them?

I assume this is what you meant by spreading your money around providers - obviously not necessarily going to the limit each time, but I just did so in my example.

Linton

SavingStudent1 said:

masonic said:

Aretnap has done the maths for you. The reason most people hold gilts is as a diversifier. For that purpose a fund is more convenient. The aim is have some inverse correlation with equities and to rebalance from one to the other so as to buy low and sell high in general. That was a good proposition when bonds returned ~ inflation + 1%, today not so much. Buying and holding gilts to maturity will be almost guaranteed to return less than a fixed term consumer savings account.

Thank you, I am a beginner so I don't know much of what all these things mean, but I am planning to read and learn on it all .
Yes, I just realised this to be honest when I understood the calculations thanks to Aretnap and done it on larger values.

So, can I ask: How do we know when a government releases a new gilt e.g. if they release it today at face value HM Treasury 1.5% Sept 2035, - made it up, but how would I know that it has been released? Do I just have to keep up with the news or follow a certain page? Because I assume then I can buy it at face value £100 and the savings would be a bit better I suppose?

But yes, with low moneys, a fixed term consumer savings account earns so much more!!

You cannot buy a gilt on release at its face value except by chance as these days all gilts are auctioned.  You as a small retail customer really are limited to the secondary market buying them through your investment platform from people who want to sell.  https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1E ( a really clunky website) gives a list of all bonds issued.  So far I have yet to find any issued over the past 3 months on HL's list of bonds available.  I guess that many bonds are taken by the institutions and dont reach the market,

Sadly as far as I can see directly buying individual gilts to meet your needs is difficult and I believe the whole area is best left to the professionals.   Bond index funds will hold many different bonds with a range of maturity dates which really does not make much sense to me unless you just want to hold bonds in general as padding for your risky equity investments.

SavingStudent1

Linton said:

SavingStudent1 said:

masonic said:

Aretnap has done the maths for you. The reason most people hold gilts is as a diversifier. For that purpose a fund is more convenient. The aim is have some inverse correlation with equities and to rebalance from one to the other so as to buy low and sell high in general. That was a good proposition when bonds returned ~ inflation + 1%, today not so much. Buying and holding gilts to maturity will be almost guaranteed to return less than a fixed term consumer savings account.

Thank you, I am a beginner so I don't know much of what all these things mean, but I am planning to read and learn on it all .
Yes, I just realised this to be honest when I understood the calculations thanks to Aretnap and done it on larger values.

So, can I ask: How do we know when a government releases a new gilt e.g. if they release it today at face value HM Treasury 1.5% Sept 2035, - made it up, but how would I know that it has been released? Do I just have to keep up with the news or follow a certain page? Because I assume then I can buy it at face value £100 and the savings would be a bit better I suppose?

But yes, with low moneys, a fixed term consumer savings account earns so much more!!

You cannot buy a gilt on release at its face value except by chance as these days all gilts are auctioned.  You as a small retail customer really are limited to the secondary market buying them through your investment platform from people who want to sell.  https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1E ( a really clunky website) gives a list of all bonds issued.  So far I have yet to find any issued over the past 3 months on HL's list of bonds available.  I guess that many bonds are taken by the institutions and dont reach the market,

Sadly as far as I can see directly buying individual gilts to meet your needs is difficult and I believe the whole area is best left to the professionals.   Bond index funds will hold many different bonds with a range of maturity dates which really does not make much sense to me unless you just want to hold bonds in general as padding for your risky equity investments.

Thanks, that really helps and makes sense. Cheers for the website too, just saw 2 gilts were issued today!
Yes, I will probably look into bonds in the future then when I start to invest properly and want to diversify my portfolio, but now I am understanding what is best for my current situation and what is not, thanks to all of you!

Thrugelmir

SavingStudent1 said:

Linton said:

SavingStudent1 said:

masonic said:

Aretnap has done the maths for you. The reason most people hold gilts is as a diversifier. For that purpose a fund is more convenient. The aim is have some inverse correlation with equities and to rebalance from one to the other so as to buy low and sell high in general. That was a good proposition when bonds returned ~ inflation + 1%, today not so much. Buying and holding gilts to maturity will be almost guaranteed to return less than a fixed term consumer savings account.

Thank you, I am a beginner so I don't know much of what all these things mean, but I am planning to read and learn on it all .
Yes, I just realised this to be honest when I understood the calculations thanks to Aretnap and done it on larger values.

So, can I ask: How do we know when a government releases a new gilt e.g. if they release it today at face value HM Treasury 1.5% Sept 2035, - made it up, but how would I know that it has been released? Do I just have to keep up with the news or follow a certain page? Because I assume then I can buy it at face value £100 and the savings would be a bit better I suppose?

But yes, with low moneys, a fixed term consumer savings account earns so much more!!

You cannot buy a gilt on release at its face value except by chance as these days all gilts are auctioned.  You as a small retail customer really are limited to the secondary market buying them through your investment platform from people who want to sell.  https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1E ( a really clunky website) gives a list of all bonds issued.  So far I have yet to find any issued over the past 3 months on HL's list of bonds available.  I guess that many bonds are taken by the institutions and dont reach the market,

Sadly as far as I can see directly buying individual gilts to meet your needs is difficult and I believe the whole area is best left to the professionals.   Bond index funds will hold many different bonds with a range of maturity dates which really does not make much sense to me unless you just want to hold bonds in general as padding for your risky equity investments.

Thanks, that really helps and makes sense. Cheers for the website too, just saw 2 gilts were issued today!
Yes, I will probably look into bonds in the future then when I start to invest properly and want to diversify my portfolio, but now I am understanding what is best for my current situation and what is not, thanks to all of you!

Diversify and construct a robust all weather portfolio now.  Don't leave it until it's too late. Markets can be savage places at times. Not always benign and seemingly easy places to make money. The markets will always be a step or two ahead of you. 

SavingStudent1

Thrugelmir said:

SavingStudent1 said:

Linton said:

SavingStudent1 said:

masonic said:

Aretnap has done the maths for you. The reason most people hold gilts is as a diversifier. For that purpose a fund is more convenient. The aim is have some inverse correlation with equities and to rebalance from one to the other so as to buy low and sell high in general. That was a good proposition when bonds returned ~ inflation + 1%, today not so much. Buying and holding gilts to maturity will be almost guaranteed to return less than a fixed term consumer savings account.

Thank you, I am a beginner so I don't know much of what all these things mean, but I am planning to read and learn on it all .
Yes, I just realised this to be honest when I understood the calculations thanks to Aretnap and done it on larger values.

So, can I ask: How do we know when a government releases a new gilt e.g. if they release it today at face value HM Treasury 1.5% Sept 2035, - made it up, but how would I know that it has been released? Do I just have to keep up with the news or follow a certain page? Because I assume then I can buy it at face value £100 and the savings would be a bit better I suppose?

But yes, with low moneys, a fixed term consumer savings account earns so much more!!

You cannot buy a gilt on release at its face value except by chance as these days all gilts are auctioned.  You as a small retail customer really are limited to the secondary market buying them through your investment platform from people who want to sell.  https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1E ( a really clunky website) gives a list of all bonds issued.  So far I have yet to find any issued over the past 3 months on HL's list of bonds available.  I guess that many bonds are taken by the institutions and dont reach the market,

Sadly as far as I can see directly buying individual gilts to meet your needs is difficult and I believe the whole area is best left to the professionals.   Bond index funds will hold many different bonds with a range of maturity dates which really does not make much sense to me unless you just want to hold bonds in general as padding for your risky equity investments.

Thanks, that really helps and makes sense. Cheers for the website too, just saw 2 gilts were issued today!
Yes, I will probably look into bonds in the future then when I start to invest properly and want to diversify my portfolio, but now I am understanding what is best for my current situation and what is not, thanks to all of you!

Diversify and construct a robust all weather portfolio now.  Don't leave it until it's too late. Markets can be savage places at times. Not always benign and seemingly easy places to make money. The markets will always be a step or two ahead of you. 

Thank you for your advice, I forgot to say that I haven't started investing yet. I am still just trying to understand different products and services, e.g. gilts in this thread. Do you have any recommendations on any websites or youtube channels that can help with this for certain products and services?

Thrugelmir

SavingStudent1 said:

Thrugelmir said:

SavingStudent1 said:

Linton said:

SavingStudent1 said:

masonic said:

Aretnap has done the maths for you. The reason most people hold gilts is as a diversifier. For that purpose a fund is more convenient. The aim is have some inverse correlation with equities and to rebalance from one to the other so as to buy low and sell high in general. That was a good proposition when bonds returned ~ inflation + 1%, today not so much. Buying and holding gilts to maturity will be almost guaranteed to return less than a fixed term consumer savings account.

Thank you, I am a beginner so I don't know much of what all these things mean, but I am planning to read and learn on it all .
Yes, I just realised this to be honest when I understood the calculations thanks to Aretnap and done it on larger values.

So, can I ask: How do we know when a government releases a new gilt e.g. if they release it today at face value HM Treasury 1.5% Sept 2035, - made it up, but how would I know that it has been released? Do I just have to keep up with the news or follow a certain page? Because I assume then I can buy it at face value £100 and the savings would be a bit better I suppose?

But yes, with low moneys, a fixed term consumer savings account earns so much more!!

You cannot buy a gilt on release at its face value except by chance as these days all gilts are auctioned.  You as a small retail customer really are limited to the secondary market buying them through your investment platform from people who want to sell.  https://www.dmo.gov.uk/data/pdfdatareport?reportCode=D2.1E ( a really clunky website) gives a list of all bonds issued.  So far I have yet to find any issued over the past 3 months on HL's list of bonds available.  I guess that many bonds are taken by the institutions and dont reach the market,

Sadly as far as I can see directly buying individual gilts to meet your needs is difficult and I believe the whole area is best left to the professionals.   Bond index funds will hold many different bonds with a range of maturity dates which really does not make much sense to me unless you just want to hold bonds in general as padding for your risky equity investments.

Thanks, that really helps and makes sense. Cheers for the website too, just saw 2 gilts were issued today!
Yes, I will probably look into bonds in the future then when I start to invest properly and want to diversify my portfolio, but now I am understanding what is best for my current situation and what is not, thanks to all of you!

Diversify and construct a robust all weather portfolio now.  Don't leave it until it's too late. Markets can be savage places at times. Not always benign and seemingly easy places to make money. The markets will always be a step or two ahead of you. 

Thank you for your advice, I forgot to say that I haven't started investing yet. I am still just trying to understand different products and services, e.g. gilts in this thread. Do you have any recommendations on any websites or youtube channels that can help with this for certain products and services?

The world of investing is influenced by differing opinions. For anyone starting out.  I'd recommend buying a copy of 

Harriman's New Book of Investing Rules: The Do's and Don'ts of the World's Best Investors

Within the book are a diverse range of views. That will help you formulate your own.  Extremely readable and a book can you can dip in and out of.  As with over 50 contributors. No individual one runs to more than 8 or 9 pages.