Bonds - Your views at the moment?

Alex9384

wmb194 said:

In recent weeks the talking heads on Bloomberg and CNBC say they like the look of government and investment grade corporate bonds but they don't like sub-investment grade i.e. junk. As Masonic writes, they don't think the yields on these reflect the risks of recession given they're more likely to default and they tend to trade more like equities. If the equity markets take another leg lower so will these, more so than investment grade.

Presumably you are talking about US talking heads? I listen to lot of them these days, mainly on Wealthion on youtube, as well as reading Investopedia, but I wish there was an UK version of something like that. I asked on this forum about a month ago about buying US ETFs and it turns out we can't even do that anymore. Allegedly that's for some kind of a "protection" but I suspect it might as well be simply because EU countries don't want people to invest in the US rather than EU? Anyway, most info is focused on the US. Anyone knows some good channels or websites where they invite fund managers, economists, etc., and talk mostly about the UK?

Alex9384

So, is there any point in buying bonds for someone like me, who only has about 10k to invest?

Currently I have 5k in Barclays Rainy Day saver at 5.12%, the rest in Chase Saver which tomorrow is increasing rate to 2.7% and also paying the maximum of £400 each month into Club Lloyds Regular saver at 5.25%.

GazzaBloom

My view of bonds is the same as as it was prior to the 2022 crash, I don't see a place for them in my portfolio, it's cash and equity index funds for me while in accumulation, I have no desire to sacrifice long term growth for dampened volatility.

In the future, when/if preservation becomes more important than growth then I may change view but the idea of holding a league table of debts doesn't sound appealing.

wmb194

Alex9384 said:

wmb194 said:

In recent weeks the talking heads on Bloomberg and CNBC say they like the look of government and investment grade corporate bonds but they don't like sub-investment grade i.e. junk. As Masonic writes, they don't think the yields on these reflect the risks of recession given they're more likely to default and they tend to trade more like equities. If the equity markets take another leg lower so will these, more so than investment grade.

Presumably you are talking about US talking heads? I listen to lot of them these days, mainly on Wealthion on youtube, as well as reading Investopedia, but I wish there was an UK version of something like that. I asked on this forum about a month ago about buying US ETFs and it turns out we can't even do that anymore. Allegedly that's for some kind of a "protection" but I suspect it might as well be simply because EU countries don't want people to invest in the US rather than EU? Anyway, most info is focused on the US. Anyone knows some good channels or websites where they invite fund managers, economists, etc., and talk mostly about the UK?

No, they were from all sorts of countries. Bloomberg and CNBC have UK/Europe focused and joint UK/US programmes e.g., Bloomberg around the European close, Bloomberg and CNBC at the European open. Anyway, a lot of issues tend to be global.

There are British websites and publications e.g., FT, the FT's Investors' Chronicle, CityWire that are UK focussed.

Fund regulation is a separate topic but there are plenty of funds, investment trusts and ETFs listed in Europe that allow you to invest in the US. It's also easier and cheaper than it's ever been to buy shares in individual US listed companies. The problem is that most US funds don't comply with the EU/UK documentation requirements and so ordinary retail investors cannot buy them.

Malthusian

Alex9384 said:

So, is there any point in buying bonds for someone like me, who only has about 10k to invest?

Yes; if you include bonds in your investment you would expect it to be less volatile, which in turn reduces the risk that you panic and cash out. Or decide that betting the farm on 100% equities was a bad idea and you should switch to a more "stable" fund (i.e. selling equities when they are down to buy bonds when they have gone up or fallen by less), which is a less damaging version of the same mistake.
To pick numbers purely out of the air, it would be conceivable for a 10k investment in 100% equities to fall to 6k while a more "balanced" investment only fell to 7.5k. Many people would panic or at least get sleepless nights after "losing" £4,000, while losing £2,500 would still feel bad but not intolerably so.
There are people who wouldn't care about their portfolio temporarily falling to 6k (or lower), and for them there is little point in holding bonds. But there aren't many of them around. There are also people who think they wouldn't care about their portfolio falling to 6k but change their mind when it actually happens.
Having a relatively small investment is not a good reason to invest above your risk tolerance. When the markets go down, people with a relatively small amount invested don't go "oh well, it's only all my investable money so I don't care", they go "arrrgghh, this is all I've got and I need to do something to stop it going down". 

Currently I have 5k in Barclays Rainy Day saver at 5.12%, the rest in Chase Saver which tomorrow is increasing rate to 2.7% and also paying the maximum of £400 each month into Club Lloyds Regular saver at 5.25%.

The kind of figures that make you wonder if it's a good idea to hold (e.g.) UK Government loans which pay 1.4%pa and have a risk of capital loss. (But also the potential for capital gain.) But see above re the benefits of lower volatility.

Alex9384

wmb194 said:

...
It's also easier and cheaper than it's ever been to buy shares in individual US listed companies. The problem is that most US funds don't comply with the EU/UK documentation requirements and so ordinary retail investors cannot buy them.

Thanks. By mentioning CityWire, you also reminded me City A.M. which I used to read some time ago.

OK, so how do you deal with the problem you mentioned above, as an ordinary retail investor?

Malthusian

Alex9384 said:

OK, so how do you deal with the problem you mentioned above, as an ordinary retail investor?

1. Buy a fund with UK approval that does the same thing the US fund you are interested in does
2. Move to the US

Option 3 is to open an account in the US or some other offshore jurisdiction that offers access to the US fund - but this takes you well beyond the realm of "ordinary retail investor" and into the category of "professional investor".

adindas

My personal View, considering Risk / Reward, Bond is not a good investment. Sofar I have not got Bond component in my investment. My investment which is functioning like Bond is high interest RSA, Saving account and current accounts awaiting allocation to equity.

Also, search it, there area already a few links in the past in this MSE, proven and billionaires investors dislike Bonds.