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40-60% Funds Worried
Comments
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ChainsawCharlie said:Albermarle said:Vanguard Lifestrategy 60%
£17,060 Invested ( Currently down by 1.88% since January)VLS 60 is down 7% Year to date, and 5% down since the end of January.
Royal London Sustainable Diversified on AJ Bell is shown as 13.7% down YTD.
When did you buy the funds, and have you made an additions or withdrawals to the funds during this year?0 -
I’m not suggesting any fund, as I’d have to dig into what you already have and know your mind. But I think anyone having bonds has to at least think about inflation linked bonds.
One weakness of nominal bonds is you redeem them for their original value, and inflation could have trashed the value of £100 after 12 years. Of course, their yield includes some reward for anticipated inflation, but if there’s unanticipated inflation you lose out to that extent. But not with linkers; they move with inflation (up or down). That’s protection against one of the few risks nominal bonds face (interest rate changes; default; unanticipated inflation).
Backtesting shows US linkers have done better than nominal bonds, after inflation adjustment. The future may be different, and linkers might turn out to be worse but the difference shouldn’t be huge for the potential benefit. EU comparison at backtest.curvo.eu shows a bit different, but it’s unclear if there’s inflation adjustment to the nominal’s returns.
There is no other liquid investible asset that protects against unexpected inflation over the medium term as reliably; all offers will be considered.
Whether 15% of bonds in linkers is worth the effort, not sure.
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JohnWinder said:
There is no other liquid investible asset that protects against unexpected inflation over the medium term as reliably; all offers will be considered.
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Perhaps there is something to be said for using an active bond fund such as Royal London Global Index Linked for inflation hedging which is ca. 45% US, not too expensive to pay someone else to work it out (hopefully).1
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Just wondering - with funds like LifeStrategy 20 and 40, is the average bond duration about 9 years too? Aren't these sold as lower 'risk' which can be held for shorter length of time, say 5-7 years? Is that then potentially problematic?
In the coming years I'll be looking to de-risk as I get closer to wanting to access money. Is this something I'll need to consider?0 -
safe_hands2 said:Just wondering - with funds like LifeStrategy 20 and 40, is the average bond duration about 9 years too? Aren't these sold as lower 'risk' which can be held for shorter length of time, say 5-7 years? Is that then potentially problematic?
In the coming years I'll be looking to de-risk as I get closer to wanting to access money. Is this something I'll need to consider?They can be held for a shorter length of time with a low probability of sustaining a loss over those 5-7 years. The risk is never zero, but the extent of your loss over that timeframe would be relatively small. VLS 20 over 5 years has now delivered an annualised return of +1.7%, down from nearly 4% just 6 months ago. It may not have quite bottomed out, but even over this particularly bad time it has performed only a little worse than fixed term cash.It is something that you should consider in so far as it is probably not the best place for money you will need to spend in the next year or two. It would be a shame for someone to be forced into selling units right now. The ability to fund a couple of years spending from a rolling ladder of fixed term savings can come in useful in situations like this. Chances are things will look rather better by that time.2 -
I still can't get my head around why bonds are desirable in a fund like VLS if they are more than likely going to lose you money, I realise they are there to reduce volatility and usually correlate with equities, but currently they are going in the same direction as equity so by the time 7 years or 10 years comes along aren't the bonds likely to be worthless?0
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ChainsawCharlie said:I still can't get my head around why bonds are desirable in a fund like VLS if they are more than likely going to lose you money, I realise they are there to reduce volatility and usually correlate with equities, but currently they are going in the same direction as equity so by the time 7 years or 10 years comes along aren't the bonds likely to be worthless?If the bonds typically held by VLS become worthless, then it means money has become worthless, governments have lost control, and society as we know it has collapsed. If you believe that's going to happen, then you wouldn't invest in a fund like VLS, or in anything at all.Over what time period have you looked to come to the conclusion that bonds gradually lose money until they become worthless? Have you come across any other data that suggests otherwise?Perhaps some basic background reading about what bonds are and how they work would be worthwhile.1
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masonic said:ChainsawCharlie said:I still can't get my head around why bonds are desirable in a fund like VLS if they are more than likely going to lose you money, I realise they are there to reduce volatility and usually correlate with equities, but currently they are going in the same direction as equity so by the time 7 years or 10 years comes along aren't the bonds likely to be worthless?If the bonds typically held by VLS become worthless, then it means money has become worthless, governments have lost control, and society as we know it has collapsed. If you believe that's going to happen, then you wouldn't invest in a fund like VLS, or in anything at all.Over what time period have you looked to come to the conclusion that bonds gradually lose money until they become worthless? Have you come across any other data that suggests otherwise?Perhaps some basic background reading about what bonds are and how they work would be worthwhile.
So not sure if bonds behave in this way in a mutual pool like VLS0 -
ChainsawCharlie said:masonic said:ChainsawCharlie said:I still can't get my head around why bonds are desirable in a fund like VLS if they are more than likely going to lose you money, I realise they are there to reduce volatility and usually correlate with equities, but currently they are going in the same direction as equity so by the time 7 years or 10 years comes along aren't the bonds likely to be worthless?If the bonds typically held by VLS become worthless, then it means money has become worthless, governments have lost control, and society as we know it has collapsed. If you believe that's going to happen, then you wouldn't invest in a fund like VLS, or in anything at all.Over what time period have you looked to come to the conclusion that bonds gradually lose money until they become worthless? Have you come across any other data that suggests otherwise?Perhaps some basic background reading about what bonds are and how they work would be worthwhile.
So not sure if bonds behave in this way in a mutual pool like VLS
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