Which government bonds to buy and how?

jim_arm_chair

Most of my portfolio is invested in passive global index funds. I understand that for most people (unless you're very young) you should have some % of your portfolio in government bonds as the safe (if unexciting) hedge to your equities. Over time you move a greater ratio from equities to bonds as your risk tolerance decreases. 

Where do you buy these types of bonds? There's lots of information about index funds but I can't find much about bonds. It seems surprisingly niche given that I thought this was part of investing 101. 

penners324

The price of bonds has fallen dramatically in the last few months. Why would you?

jim_arm_chair

penners324 said:

The price of bonds has fallen dramatically in the last few months. Why would you?

Well then it could be the perfect time to buy? 

Also is there a big difference between bonds and funds of bonds? Funds can go up and down in value but if you buy a bond directly then the government will pay you back that amount in x years. So I don't think it can go down in value if you're not trading it as a derivative? 

Im not that clued up on this stuff so apologies if anything ive said is incorrect. 

aroominyork

There have been many threads recently about bonds, with quite a number focusing on buying individual UK government bonds (gilts) rather than funds. I suggest you read through them, though you are right that prices have fallen recently while interest rates/yields have risen, potentially making them a better buy than in recent years. You are also correct that you would be paid back a known amount on maturity.

hallmark

A lazy way to get an idea on this might be to look at the bonds component of Vanguard LS60 or of LS80

wmb194

Look at the other threads but basically you need to use a stockbroker that offers them.

Hargreaves Lansdown has a good page on its website summarising the individual gilts that are out there. I'm not sure whether it also deals in US Treasuries and other foreign government bonds.

https://www.hl.co.uk/shares/corporate-bonds-gilts/bond-prices/uk-gilts

Eco_Miser

jim_arm_chair said:

Funds can go up and down in value but if you buy a bond directly then the government will pay you back that amount in x years. So I don't think it can go down in value if you're not trading it as a derivative? 

The government will pay the face value (£100) of the bond on maturity, which is not necessarily what you paid for it.

Until then, you can sell (or buy) on the market, at what the market thinks the future income flows are worth now, probably less as £100 next year won't buy as much as £100 now.