Cash fund vs Gilt Fund

Victorwelldue

Coming back to this thread of mine from over a year ago: So rightly or wrongly I opted to stop buying gilts and started buying a cash fund instead. I didn't sell my existing gilts though, only switched for new contributions. Here's how the two funds have performed since I made this switch:



My overall fund now comprises:
71% Equities
17% Gilt fund
12% Cash fund

Risk wise I don't want to be any higher than 70(ish) % equities but I'm not sure what to do about the remainder, so I'm just looking for opinions really. With interest rates generally predicted to slowly fall over next couple of years is now a good time to stop buying cash fund and start buying the gilt fund again? Or would I better sticking with current allocation? Aiming to start drawing down in approx 8 to 12 years.

masonic

You could treat your cash fund as a proxy for ultra-short gilts. It will be similar in returns. So you have in effect modified the average duration of your gilt holdings. The gilt index is quite skewed towards longer duration than is the case for global government bonds, so this present allocation is not unreasonable. The gilt fund will probably swell to a greater proportion over the next few years, and you have the option to lifestyle from gilts to cash fund (or straight from equities to cash) in the later years if it makes sense.

Roger175

That graph looks a little distorted insofar as it appears to start in June/July, pre bond crash, whereas your post originated from 2nd/3rd Oct. Had you started the graph later, it would look very different.  

JohnWinder

‘Last year at this time, 85% of economists in one poll predicted a recession this year — and that was an optimistic take compared to the 100% probability of a recession forecast two months earlier. ‘  There wasn't one. https://www.bloomberg.com/opinion/articles/2023-12-26/what-recession-how-so-many-economists-got-it-so-wrong
In 2014 ‘100% of economists think yields will rise within six months.’ Yields fell 0.5%. https://www.marketwatch.com/story/yes-100-of-economists-were-dead-wrong-about-yields-2014-10-21

‘With interest rates generally predicted to ..... next couple of years’

Is there any point?

Victorwelldue

Roger175 said:

That graph looks a little distorted insofar as it appears to start in June/July, pre bond crash, whereas your post originated from 2nd/3rd Oct. Had you started the graph later, it would look very different.  

Its from mid July 2022 which is when I last bought the gilt fund. In August & September I bought 100% equities then I started to buy the cash fund after making this post in October 2022 and have been doing so ever since (35% of my contributions).