Bonds

Thrugelmir

A multi asset fund would provide you with three benefits, regular rebalancing, tweaking of the asset allocation and low costs.  Creating a portfolio for oneself is easy enough when taking an immediate snapshot. Challenges arise as time passes and the portfolio becomes progressively disjointed and out of kilter. 

Albermarle

ChainsawCharlie said:

Thanks, good point, I can see how that could easily be overlooked
Are you meaning, you have 1 multi asset fund only for the portfolio? And no other funds

That is certainly one way to do it . Note that AJ Bell offer their own low cost multi asset funds , not just the more expensive portfolios.
AJ Bell funds | AJ Bell Youinvest

JohnWinder

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?

I’ll add a third view on this, to the existing responses of: AAA bonds are always a good choice (if you want bonds) - agree, and at 20% or your portfolio any differences in bond fund outcomes are going to have a small impact on the overall portfolio whose gyrations and returns will be largely due to the stocks.

And the second response, ‘Over 10 years, as the duration of IGLT is 11 years, you can be fairly certain of getting an average return of the YTM of 1.8% less total costs.’ 

I’d say you already know enough about bonds to answer your question yourself, and you’ll get better answers if you can be clearer on your investment horizon ie ‘duration’, because matching the bonds’ duration with your spending duration is theoretically optimal. And while we can’t hope for great precision in either of those, at least making an effort means you have fewer regrets in future than if you ignore the issue and it comes back to bite you.

If you have IGLT (duration 11 years), and it turns out your ‘minimum 10 year investment’ horizon is 12 years, then a 2% rise in interest rates during year 12 is going to push the value of IGLT down ~22%. Admittedly, other factors might ameliorate that drop, and having 20% of your portfolio fall 22% is only an overall drop of 4%, but it might be possible to moderate that drop with better duration matching; ie, better than having a spending duration of 1 year (at the start of year 12) and a fund duration of 11 years.

As I noted recently, two funds, one longer and one shorter in duration held together give intermediate durations depending on their proportions. Secondly, if your spending needs are all in year 12, your duration is 12 years; if your spending needs span years 12-24, then your duration is roughly 12 + (half of 24-12) = 18 years.

That’s the ‘bad news’. The good can be seen in the graphs in the linked post, which show rising interest rates can hardly at all impact intermediate duration bond fund prices if the rises are not too steep (large, at short intervals). Those charts can usefully bounce back into your consciousness whenever you hear ‘interest rates are rising, the sky is falling in on bonds’.

https://www.bogleheads.org/forum/viewtopic.php?t=360575

https://www.bogleheads.org/forum/viewtopic.php?t=240012

https://www.bogleheads.org/forum/viewtopic.php?t=373899

And back to your ‘Bonds may not be perfect at moment’. I wonder under what conditions they are perfect? And it can help to view your portfolio as a whole: how is it doing overall? It would be unrealistic to expect every element of it to be the best performing element all the time. That’s why it’s diversified.

coyrls

ChainsawCharlie said:

JohnWinder said:

Many thanks again John for your well detailed help and advice, really helpful.

Looking around at other funds to switch to, in order to slim down this 19 fund portfolio, I am finding that there just isn't anything performing well at the moment.
My portfolio lost another 1% yesterday

I may sell down most of my portfolio and invest the proceeds into about 3 different multi asset funds, say for example a global one
A UK one
And a decent bond.
My theory is I won't lose financially by selling down funds at a lower price than what I paid, because I will be reinvesting the proceeds in funds which will have dropped by the same amount, with the expectation they will eventually go back up in value, as much as the ones I will have sold.

You seem to be describing single asset funds, not multi asset funds.  A multi asset fund would contain both equities and bonds, either in a fixed ratio or in a variable risk-based ratio.  You only need one risk appropriate multi asset fund.

aroominyork

ChainsawCharlie said:

JohnWinder said:

Looking around at other funds to switch to, in order to slim down this 19 fund portfolio, I am finding that there just isn't anything performing well at the moment.
My portfolio lost another 1% yesterday

What do you mean by “there just isn't anything performing well at the moment”? There will always be funds performing better and worse than the index, but if you are looking at index funds they are tracking the market. HSBC FTSE All-World Index fell 1.99% yesterday so not many of us will have made money!

ChainsawCharlie said:

JohnWinder said:

I may sell down most of my portfolio and invest the proceeds into about 3 different multi asset funds, say for example a global one
A UK one
And a decent bond.
My theory is I won't lose financially by selling down funds at a lower price than what I paid, because I will be reinvesting the proceeds in funds which will have dropped by the same amount, with the expectation they will eventually go back up in value, as much as the ones I will have sold.

Have another read of masonic’s 9.49pm post yesterday. If you sell high risk funds and buy low risk funds, a rising market may not see you recoup your losses. You need to recognise that by de-risking you may be accepting some losses, but with the upside of reducing future losses in a downturn.

PS. A suggestion: put this down and come back to it next week. There is a lot of info and it might help to give it time to straighten itself out and sink in.

CheekyMikey

ChainsawCharlie said:

"What do you mean by “there just isn't anything performing well at the moment”? 

Basically just that, I don't see any funds increasing in value, none in my portfolio and no funds i research, not even the multi asset funds

UK index funds are doing relatively well, for example Vanguard UK Equity Income Index. But you probably have to look at the natural resources and infrastructure sectors to get really high growth performance, obviously partly driven by events of the last 3 months. Question is, would you have missed the boat on those? Maybe, maybe not. 

tebbins

That statement is a truism, it adds no value to helping you make a decision. Sometimes markets fall, the purpose of investing is not to chase high returns. The dip you are talking about, this year so far is a tiny, tiny period by which to declare "nothing is performing" as if performing means to only go up. The word performance means to describe how a particular instrument behaves.
Short term price movements should not enter your investment decision making at all unless they materially affect things. A 5-10% dip across global stocks and bonds should not materially affect a decision. I don't know of a single calendar year that didn't experience that kind of volatility - though I'm sure someone else will have an example ready.

E.g. "My portfolio lost another 1% yesterday" - in the investing world that's completely normal day-to-day volatility, that's how investing works. You are talking as if your portfolio is a sinking ship, it isn't. Stocks and bonds and funds do not "sink" in the continuous tense, no one can know or say "it is sinking" because no one has a crystal ball, and people who "get out" at the first sign of trouble and wait until "things are normal again" before going back into the market tend to have a hard time in the investing world.
Year to date the FTSE 100 is up nearly 4% (total return), does that mean the FTSE 100 is performing and other indices are not, does that make it better, does that mean you should switch most/all of your portfolio into UK large cap funds?
Have a watch of this: https://youtu.be/oMmocnLnVgQ

tebbins

Almost everyone's portfolios have probably dipped somewhat since the start of the year, short-term movements have nothing to do with whether a given portfolio is appropriate and sensible for the owner.

Thrugelmir

ChainsawCharlie said:

"What do you mean by “there just isn't anything performing well at the moment”? 

Basically just that, I don't see any funds increasing in value, none in my portfolio and no funds i research, not even the multi asset funds

Liquidate and move into cash until you've decided what your investment strategy is. Investments continually fluctuate in value. That's the nature of markets in the real world. The recent past has been heavily influenced by macro events driving asset prices higher and higher. 

masonic

VLS 60 is from Vanguard's multi-asset fund range. It contains 60% global equities with a fairly strong bias to the UK, and 40% bonds. It has no exposure to property. Whereas the Fidelity range does not have UK bias and includes property. The closest equivalent to VLS 60 is Fidelity Multi Asset Allocator Growth, which is around 55% equities and 35% bonds.

I would not get fixated about choosing a fund that has fallen as much as your portfolio. Rather, choose an option that is in line with your 'balanced' risk profile. Markets could continue to fall, so taking on additional risk to avoid crystallising losses might not be helpful. As you'll be holding for the long term, a few percent lost in the early years will soon become insignificant.