DIY or IFA

Albermarle

Is anybody else wondering where the 'anti IFA posters' have disappeared to ?

A thread called 'DIY or IFA' used to always bring some immediate response from them .

Malthusian

Albermarle said:

Is anybody else wondering where the 'anti IFA posters' have disappeared to ?

Well, the resident one is certainly still active on the forums. The mods are much less tolerant of bunfights than they used to be (I got a two week ban a few weeks ago for piling up yellow cards) so it may be that needling IFAs is just more trouble than it is worth nowadays. 

RTD2020

gm0 said:

Ladders
Liability Matching

Web research or I suggest "Rational Expectations" Bernstein. 

Thanks to @JohnWinder for mentioning those 2 concepts, and thank you for your clear and understandable explanations of them, that's probably saved me some time wading through many lengthier and less clear articles on the Internet. Although Bond Ladders may be too much effort for me, given @Linton comment about their limited availability.

I've not come across Bernstein, but his book and ideas look interesting, and seem to align with my philosophy - not maximising gains, but not dying poor.

coyrls

Linton said:

Bond ladders may well be a good idea. The downside is that one’s ability to trade them may be limited. I have only found 2 platforms, II and HL, that sell both gilts and corporate bonds online and both have a limited range. It appears that II only have about 16 bonds in total including a few fixed gilts, IL and corporate bonds. For anything else telephone dealing is required. AJBell only sell bonds by telephone.  Fidelity sell corporate bonds online but apparently not gilts. I have not found any other platform that supports bonds though I have not made an exhaustive search.

Halifax charge their online dealing charge (£9.95) for telephone dealing of gilts.  Their website advertises gilts as available for online dealing but they are not, I guess that’s why they charge the online rate.  I have bought index linked gilts through Halifax’s phone dealing and they have been very good.  They search the best price from a number of brokers and the price I paid was significantly below the spread that I was first quoted and they won’t place the deal until you’ve confirmed that you are happy with the actual price quoted.

Pat38493

coyrls said:

Linton said:

Bond ladders may well be a good idea. The downside is that one’s ability to trade them may be limited. I have only found 2 platforms, II and HL, that sell both gilts and corporate bonds online and both have a limited range. It appears that II only have about 16 bonds in total including a few fixed gilts, IL and corporate bonds. For anything else telephone dealing is required. AJBell only sell bonds by telephone.  Fidelity sell corporate bonds online but apparently not gilts. I have not found any other platform that supports bonds though I have not made an exhaustive search.

Halifax charge their online dealing charge (£9.95) for telephone dealing of gilts.  Their website advertises gilts as available for online dealing but they are not, I guess that’s why they charge the online rate.  I have bought index linked gilts through Halifax’s phone dealing and they have been very good.  They search the best price from a number of brokers and the price I paid was significantly below the spread that I was first quoted and they won’t place the deal until you’ve confirmed that you are happy with the actual price quoted.

I thought gilts were only sold at auction?  I guess you are buying the actual gilt from whoever owns it so you will receive a regular coupon and then the initial sum back at the end?  

So for example I buy the gilts for £1000, I get £20 coupon back every year for x years and then at the end I get £1000 back?  Does "index linked" mean linked to inflation so at the end you get £1000 plus inflation back again?

JohnWinder

If an auction has a deadline when the sale must be decided, and buyers bid (each higher than the previous bid), then gilts are not traded at auction.  Better (or worse) than getting your £20 coupon each time, you get more (or less) than £20 depending on the inflation (or deflation) since the previous coupon payment. And yes, the principal returned at maturity is £1000 adjusted for inflation.

coyrls

They are sold at auction on issue but from then on they are liquid, in the sense that they can be bought and sold on the market.

Linton

coyrls said:

They are sold at auction on issue but from then on they are liquid, in the sense that they can be bought and sold on the market.

Yes,also larger scale sales of old gilts are at auction such as when the BoE sells gilts it acquired under QE.  The point about the auctions is that no-one has an inherent right to buy at par.

Pat38493

JohnWinder said:

If an auction has a deadline when the sale must be decided, and buyers bid (each higher than the previous bid), then gilts are not traded at auction.  Better (or worse) than getting your £20 coupon each time, you get more (or less) than £20 depending on the inflation (or deflation) since the previous coupon payment. And yes, the principal returned at maturity is £1000 adjusted for inflation.

Ok but if I phoned up Halifax as mentioned above and bought some, am I buying them directly in the auction or from someone who already acquired them in the auction?

JohnWinder

The latter. I don’t think you can buy by auction at issuance unless you are registered to do so and have been through a tiresome anti-money laundering check. And you wouldn’t want to try to buy them at the auction because having no idea of what they are worth, you could overpay or just waste your time with an under-bid. Forget auctions for government bonds. Pay the asking price, if you can afford it and if the buy/sell spread is not too big.