Investing money now in Bonds and Equities - is it worth it?

Gavlaar

I saw an IFA back in April of this year and through a number of delays, some on my part, some on theirs, am finally in a position to part with my money - advice was transfer my existing pensions into a SIPP (about 130k) and invest the same amount in low to medium risk schemes.

Both sets of money will be sitting in their recommended investment schemes which are predominantly made up of Bonds and Equities - the split on one investment is 30% UK bonds, 10% emerging market bonds, 12% UK equities and 28% international equities, the other scheme is 35% UK bonds and 29% each of UK and Global equities. 

Anyhows I've been watching the latest interest rate hikes and inflationary levels with alarm as my understanding is with bonds especially there is an inverse relationship between the price of the bond and inflation/interest rates. So when they stay high the bond values are low.

The question therefore is it a really poor idea to start investing in these commodities given that inflation and interest rates are likely to remain high for the foreseeable future?

Is it worth hanging on or am I in danger of trying to predict the bottom of the market?

masonic

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Gavlaar

masonic said:

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Thanks for the advice. I'm a first time investor so am a bit nervous anyway which is why my risk rating came out as low to medium.

I agree with my IFA that there is never a good time to start as over 5 years plus in investing these bumps should even out, am conversely conscious though that there might be an obviously bad time to start. 

I've read horror stories on this forum about similar new investors starting a year ago and already their money has dropped by 10 to 15% which must be very disheartening.

billy2shots

Another way of looking at it is,

If you were happy to invest back in April. 
You should be delighted to invest now. 

Notepad_Phil

Gavlaar said:

masonic said:

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Thanks for the advice. I'm a first time investor so am a bit nervous anyway which is why my risk rating came out as low to medium.

I agree with my IFA that there is never a good time to start as over 5 years plus in investing these bumps should even out, am conversely conscious though that there might be an obviously bad time to start. 

I've read horror stories on this forum about similar new investors starting a year ago and already their money has dropped by 10 to 15% which must be very disheartening.

I thought you were consolidating existing pensions into a new SIPP, so what were they invested in - or were they DB pensions that you've transferred out of?

A drop in investments should not be considered disheartening but rather as part of investment life. They will continue to go up and down, sometimes by less and sometimes by more, but unless we're all doomed then provided you're well diversified then you will eventually recover your losses and your new investments during the gloomy parts will start to look particularly healthy.

Albermarle

As above your previous pensions must have been invested in something, and if you are planning to drawdown this SIPP at some point, that could mean you are invested for many decades (you have not said your age). If so you will see the markets up and down many times.
We are reluctant to make specific recommendations on the forum, but I would probably be looking at a lower % of bonds and a lower % of UK. Although without knowing the timeframe involved, it is difficult to say.

Gavlaar

Notepad_Phil said:

Gavlaar said:

masonic said:

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Thanks for the advice. I'm a first time investor so am a bit nervous anyway which is why my risk rating came out as low to medium.

I agree with my IFA that there is never a good time to start as over 5 years plus in investing these bumps should even out, am conversely conscious though that there might be an obviously bad time to start. 

I've read horror stories on this forum about similar new investors starting a year ago and already their money has dropped by 10 to 15% which must be very disheartening.

I thought you were consolidating existing pensions into a new SIPP, so what were they invested in - or were they DB pensions that you've transferred out of?

A drop in investments should not be considered disheartening but rather as part of investment life. They will continue to go up and down, sometimes by less and sometimes by more, but unless we're all doomed then provided you're well diversified then you will eventually recover your losses and your new investments during the gloomy parts will start to look particularly healthy.

Sorry silly question, what's a DB pension? They are workplace pensions I've accumulated over my career as I've moved from job to job if that's what this means, I asked if I could consolidate them together and the IFA recommended investing them all into a SIPP which I don't have currently.

Gavlaar

Albermarle said:

As above your previous pensions must have been invested in something, and if you are planning to drawdown this SIPP at some point, that could mean you are invested for many decades (you have not said your age). If so you will see the markets up and down many times.
We are reluctant to make specific recommendations on the forum, but I would probably be looking at a lower % of bonds and a lower % of UK. Although without knowing the timeframe involved, it is difficult to say.

Yes would be looking to potentially access this in about a year and a half when I'm 55 but the IFA have said that the timeframe for this investment should be viewed over at least 5 years.

Albermarle

Gavlaar said:

Notepad_Phil said:

Gavlaar said:

masonic said:

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Thanks for the advice. I'm a first time investor so am a bit nervous anyway which is why my risk rating came out as low to medium.

I agree with my IFA that there is never a good time to start as over 5 years plus in investing these bumps should even out, am conversely conscious though that there might be an obviously bad time to start. 

I've read horror stories on this forum about similar new investors starting a year ago and already their money has dropped by 10 to 15% which must be very disheartening.

I thought you were consolidating existing pensions into a new SIPP, so what were they invested in - or were they DB pensions that you've transferred out of?

A drop in investments should not be considered disheartening but rather as part of investment life. They will continue to go up and down, sometimes by less and sometimes by more, but unless we're all doomed then provided you're well diversified then you will eventually recover your losses and your new investments during the gloomy parts will start to look particularly healthy.

Sorry silly question, what's a DB pension? They are workplace pensions I've accumulated over my career as I've moved from job to job if that's what this means, I asked if I could consolidate them together and the IFA recommended investing them all into a SIPP which I don't have currently.

A SIPP is just another pension with investments within it. The pensions you are moving to a SIPP, are presumably them selves invested in various funds (and will have gone down since April)
The point is that you are not starting with £130K in cash and investing it all from scratch. You are moving from one set of investments to another. Hence the question how are they invested in the current/previous pensions?

Gavlaar

Albermarle said:

Gavlaar said:

Notepad_Phil said:

Gavlaar said:

masonic said:

You've missed the majority of the drop in bonds, which are priced quite attractively now. There might be a bit further to fall, but it's a gamble whether you'd be able to time it any better. Equities have also fallen, and could have further to go, but the same argument applies. If you are really worried then you could discuss with your adviser the possibility of phasing your investment over several months, but bear in mind this means most of your investment will be sitting in cash for a while longer.

For the equities, the other potential source of concern would be the weakness of the pound. You could have a conversation with your adviser about whether currency hedging might be worthwhile.

Thanks for the advice. I'm a first time investor so am a bit nervous anyway which is why my risk rating came out as low to medium.

I agree with my IFA that there is never a good time to start as over 5 years plus in investing these bumps should even out, am conversely conscious though that there might be an obviously bad time to start. 

I've read horror stories on this forum about similar new investors starting a year ago and already their money has dropped by 10 to 15% which must be very disheartening.

I thought you were consolidating existing pensions into a new SIPP, so what were they invested in - or were they DB pensions that you've transferred out of?

A drop in investments should not be considered disheartening but rather as part of investment life. They will continue to go up and down, sometimes by less and sometimes by more, but unless we're all doomed then provided you're well diversified then you will eventually recover your losses and your new investments during the gloomy parts will start to look particularly healthy.

Sorry silly question, what's a DB pension? They are workplace pensions I've accumulated over my career as I've moved from job to job if that's what this means, I asked if I could consolidate them together and the IFA recommended investing them all into a SIPP which I don't have currently.

A SIPP is just another pension with investments within it. The pensions you are moving to a SIPP, are presumably them selves invested in various funds (and will have gone down since April)
The point is that you are not starting with £130K in cash and investing it all from scratch. You are moving from one set of investments to another. Hence the question how are they invested in the current/previous pensions?

I have also been advised to invest the same amount of cash in investments in bonds and equities by the IFA, same sort of make up as the investment SIPP, these are sitting in cash accounts currently.

But yes the other amount is currently with a number of previous workplace pension providers with Aviva, Scottish Widows and Legal and General mainly.

I'm embarrassed to say I couldn't even tell you what the funds within those provider schemes are invested in.

Brie

Gavlaar said:

Sorry silly question, what's a DB pension? They are workplace pensions I've accumulated over my career as I've moved from job to job if that's what this means, I asked if I could consolidate them together and the IFA recommended investing them all into a SIPP which I don't have currently.

a DB pension is a defined benefit pension scheme.   One that defines what you will get when you start to collect it rather than a DC, defined contribution scheme, that gives you a pot of money that you can invest, drawdown etc.

If your IFA has suggested moving them into a SIPP and has done all the proper groundwork then likely they are DC.  If they are DB it is very unlikely you will be able to move them anywhere without paying way over the odds for advice (£10K?) with no guarantee that anyone would advise you to move them.