Bond funds question

JohnWinder

Prism said:

Fixed term savings savings account are bonds and good for a short bond ladder. They can't be bought in a SIPP though.

That’s a good way to think of savings accounts, as short term bond/funds, but keep back of mind they are different creatures. You can sell your bond for more than you paid for it, or less, unlike a savings account. Similarly, you can bail out of a savings account and get what you deposited; not so with a bond which may have appreciated or depreciated. Buy/sell spreads, brokerage fees, different taxation, they’re a bit different. And of course corporate bonds can default more easily than a savings account.

older_and_no_wiser

I really struggle with understanding bonds and how they work within, say, a pension or ISA portfolio. I get the principle that their intention is to dampen the volatility of equities. I just don't know how to pick a fund within the portfolio. This is fine for my pension as the big majority percentage fund is invested in a multi asset fund which has taken care of the bond allocation based on my risk flavour choice within the fund range.

Where I have a problem is with my ISA funds. These are currently mainly in equity global index tracker funds in II, InvestEngine and Freetrade. The latter two deal with ETFs and there are a variety of bonds ETFs, but which  one(s) to choose? Currently I've not bothered as I'm happy having my ISAs 100% in global equity tracker funds. I am fine with the risk level of that choice but perhaps I should be dampening the volatility with some bonds?

I also have a fair amount of cash savings (over 10% of my total portfolio) in "high" interest rate accounts. So maybe that provides enough volatility dampening?

Am I overthinking things?

Nebulous2

Linton said:

Pat38493 said:

Linton said:

Now all gilts are sold by auction even at launch. You can buy from the government, I think the Debt Management Office, if you are registered with them. But I have no idea what that might involve.

LOL - hoist by you rown petard! 

Not at all.  The "Now" in the sentance is correct - though the sentance would be better expressed as "Gilts are sold by auction at launch".  Many years ago they  weren't.  The point being that even the institutions have to to buy at a market price at launch rather than par. I notice that the BoE has also being selling some of its QE bonds by auction.

Many years ago - in the late 70s, as a school child, I persuaded my Grandparents to buy Gilts. 3 1/2 % treasury stock at around £70. I can't remember the duration, maybe 12 years?

 At that point there was an advert in the paper, with an application form. You simply cut it out, filled it in and sent it away with a cheque. No such concept as a sophisticated investor. The price was fixed and they were either over or undersubscribed. 

My Grandfather died before they matured. I can't remember what happened, whether my Grandmother held them to maturity, but they certainly weren't a disaster, and they were quite happy with the outcome....