Bonds

threlkeld53

aroominyork said:

This is a difficult time for professionals/IFAs deciding where to invest non-equity monies, hence the articles popping up all over the place about whether the 60/40 split is dead. (Spoiler alert: it's not.)

That's true, there are loads of articles about whether the 60:40 split is dead.
I'd be interested to hear what prompted you to mention a spoiler alert and say it's not.

The Bank of England's meeting takes place 5th May. If the base rate rise increases further, would this affect the 40% bond allocations in Vanguard's and HSBC'S multi asset funds?  

Thrugelmir

masonic said:

ChainsawCharlie said:

So bottom line as a conclusion to my thread folks.

Bonds whilst may not be perfect at moment, a 20% allocation  of AAA bonds for a minimum 10 year investment,  isn't going to lose me too much, but hopefully gain?

The market has priced in most of the interest rate rises likely to be seen. 

Retail investors haven't though, seemingly oblivious to the much bigger risks posed by the macro picture. If there's a stampede for the exits. Markets will react accordingly. 

aroominyork

threlkeld53 said:

aroominyork said:

This is a difficult time for professionals/IFAs deciding where to invest non-equity monies, hence the articles popping up all over the place about whether the 60/40 split is dead. (Spoiler alert: it's not.)

That's true, there are loads of articles about whether the 60:40 split is dead.
I'd be interested to hear what prompted you to mention a spoiler alert and say it's not.

Short term noise. It might however be resting.

eskbanker

ChainsawCharlie said:

I think I will go and look for a Lumberjack:-)

I think we assumed from your name that you'd cut down trees, but obviously weren't casting any aspersions about your underwear preferences....

tebbins

You can also access £-hedged US short-term TIPS via an iShares ETF called TI5G - if you can find a platform that has it.

aroominyork

tebbins said:

You can also access £-hedged US short-term TIPS via an iShares ETF called TI5G - if you can find a platform that has it.

Just checked HL and ii and they both carry it, but it's barely shifted price in the last four years. The global fund (as well as performing better) is better diversified, which for us in the UK can't be a bad thing.

tebbins

aroominyork said:

tebbins said:

You can also access £-hedged US short-term TIPS via an iShares ETF called TI5G - if you can find a platform that has it.

Just checked HL and ii and they both carry it, but it's barely shifted price in the last four years. The global fund (as well as performing better) is better diversified, which for us in the UK can't be a bad thing.

You're only really diversifying by the relative inflation rates in the other countries, assuming they are all essentially equivalently credit worthy (ish), and importantly, by the differences in inflation measurement methodology, and by currency as the RL global fund looks like it doesn't hedge - this and the US' lower sensitivity to global supply-push inflation may explain some of the outperformance of hedged TI5G. Also TI5G is a distributing ETF so the performance chart you looked at may have excluded coupons payments.
For investing I prefer RL but you could see TI5G as a "near-cash" asset, whereas with the RL fund's duration and lack of hedging you couldn't.

aroominyork

tebbins said:

aroominyork said:

tebbins said:

You can also access £-hedged US short-term TIPS via an iShares ETF called TI5G - if you can find a platform that has it.

Just checked HL and ii and they both carry it, but it's barely shifted price in the last four years. The global fund (as well as performing better) is better diversified, which for us in the UK can't be a bad thing.

You're only really diversifying by the relative inflation rates in the other countries, assuming they are all essentially equivalently credit worthy (ish), and importantly, by the differences in inflation measurement methodology, and by currency as the RL global fund looks like it doesn't hedge - this and the US' lower sensitivity to global supply-push inflation may explain some of the outperformance of hedged TI5G. Also TI5G is a distributing ETF so the performance chart you looked at may have excluded coupons payments.
For investing I prefer RL but you could see TI5G as a "near-cash" asset, whereas with the RL fund's duration and lack of hedging you couldn't.

Well, I think those are enough differences! 

The fund is hedged. From the KIID "At least 70% of these investments will be made in the UK, North America and Europe, and will be sterling-denominated or hedged back to sterling." The fund name and factsheet should be clearer - you really have to hunt for this info.

aroominyork

Your first question: correct - you would be selling low and buying low.

Your second: it is made up of actively managed funds so you pay those companies' management fees. Maybe think about low cost index funds as your core and then see if you want to add any satellites. For the amount you are investing, just index funds would be a fine choice.

masonic

ChainsawCharlie said:

In order to ditch this 19 fund juggernaut SIPP Portfolio my IFA landed me with.
Whats everyone's views on one of the AJ Bell Youinvest ready made portfolio's.  I would probably choose the balamced fund.  I did notice it had a 30% Bond allocation.

I agree with aroominyork, I don't see any reason to favour those particular funds. If you are going to go DIY, then it would pay to keep things simple and select funds you can understand. You've seen the costs. Each fund must outperform just to keep up with a cheaper equivalent, and of course ongoing charge figures don't include all of the costs.

ChainsawCharlie said:

And here's the big question.....Am I right in thinking I wouldn't really be losing by selling down my present portfolio which is currently 5.72% down, purely because the new ready made portfolio I would be choosing is likely to be down by a similar percentage?

My present portfolio was started mid January this year.

If you look at a global equities index tracker, that's down by about 6% since the start of the year, and is quite a bit more than 5/10 on the risk scale. You may find that some of your holdings are down quite a bit more than 6% (for example Scottish Mortgage Trust, the Baillie Gifford funds and JPM Emerging Markets), while others are not down as much. Those will be approaching 10/10 on the risk scale, and are quite capable of continuing to fall by more than global markets as a whole. It is up to you whether you want to include a small portion of very high risk funds to spice up your portfolio, and whether there is any merit in keeping any of these, but they really ought not to be more than a small part of a medium risk portfolio.

You mentioned being happy to hold 20% bonds, and there are low cost multi-asset funds that could give you that in a single fund. See https://monevator.com/passive-fund-of-funds-the-rivals/ for some ideas to take a look at. One of these could stand alone, or be complemented by one or two others covering things not included in the multi-asset fund.

The alternative, which will save you platform fees at AJ Bell is to opt for a developed world ETF like VEVE, some emerging markets (using your existing investment trust or the Vanguard ETF) and a global aggregate bond ETF such as VAGP. Your platform fee will then be capped at £10 per month as you only hold "shares", saving you £130 per year on a £100k portfolio and with lower annual charges than multi-asset. You could easily adapt this to include some UK bias, or replace/bolster the bond ETF with an actively managed wealth preservation investment trust if you so wished. An 80:20 portfolio is probably going to be more risky than would be suited to you, so you might need to find something else that is defensive besides the 20% bonds.