Portfolio thoughts please..

Dh6

Good afternoon all. I’m after your thoughts on our portfolio. ( My wife and I )

When we started our investment journey around 4 years ago we set a target of reaching 100k before we’d evaluate the situation and potentially introduce bonds or other asset classes into the equities portfolio. 

Our current portfolio is as follows and is split across pension, LISA and S&S ISA. I’ll add my wife’s multi asset fund for context.

Me
100k hsbc ftse all world
 
Wife
15k hsbc global strategy balanced 

Shared
12k 6.2% NSI savings bond

My wife has no interest in our finances so I take the lead. We are both happy to stick with the hsbc multi asset fund for her indefinitely.

Im at the stage where I’d like to introduce a less volatile asset class to my side of the portfolio so that I can rebalance between them. Obviously I’m thinking initially about bonds but I’m unsure how to implement these.

I’m not sure If I want a global bond fund or individual UK gilts. I’d be rebalancing annually so if a bond fund was at a low point at rebalancing time I’d be unsure about selling. 

Is the answer to buy an individual GILT with a 1 year duration and keep rolling these over and rebalancing when it matures?

I’ve lent a lot of thought to this recently reading several books and digesting information slowly online.

For context we’re 35 and 36. 

What are your thoughts? Do I even need bonds? Are high street savings accounts enough? 

I’d like my side of the portfolio to be around 80/20 equites to bonds or bond equivalents next time I rebalance.

Kind regards DH

JohnWinder

I’d be rebalancing annually so if a bond fund was at a low point at rebalancing time I’d be unsure about selling. 

So, the bonds have fallen, what did the equities just do? And unsure about selling what?

Dh6

In my mind the bond fund can fall dramatically as we’ve seen recently but the individual gilt won’t. In my mind I want a really safe haven for my risk off side of the portfolio. It’s no good to me if bonds and equities go down together.

Linton

Dh6 said:

......

What are your thoughts? Do I even need bonds? Are high street savings accounts enough? 

I’d like my side of the portfolio to be around 80/20 equites to bonds or bond equivalents next time I rebalance.

The main use of bonds in a 80/20 portfolio is to reduce the volatility of the equity. For example if equity crashes 50% the portfolio would drop 40%.  Whether the diffenence is worth the effort is up to you.  If you are investing for the long term, say  > 10 years, and would not panic and sell the lot after a fall of 50% I dont see a great need for bonds, especially as low an amount as 20%.

I cant see a bank savings account is a suitable for replacement for bonds since rebalancing would require moving cash in and out of tax sheltered accounts.  You cant do it with a LISA or a pension anyway.

In my view it is reasonable to assume that the large fall in longer dated bonds in the past year or so was a one-off event that you may well not see again in your lifetime \nd so should be ignored.  The advice not to sell low really just applies to equities when you can get large falls from which recovery to normal conditions is fairly quick.  The bond fall was not a blip downwards but rather a reset from unprecedently low interest rates back to historically normal conditions.  So dont wait for a recovery, now is the new normal.

Johnjdc

Dh6 said:

In my mind the bond fund can fall dramatically as we’ve seen recently but the individual gilt won’t. In my mind I want a really safe haven for my risk off side of the portfolio. It’s no good to me if bonds and equities go down together.

A 1 year gilt is unlikely to fall much. On the other hand it won't rise much and if rates go back down to tiny levels, you won't lock in a gain from that and that's the rate you'll get when you next roll it over. There are also not that many low coupon gilts, if you're trying to minimise tax liability.

Dh6

Just to confirm I’ll be using the ISA or SIPP to hold the gilt/bond fund so there will be no tax liability.

Dh6

Linton said:

Dh6 said:

......

What are your thoughts? Do I even need bonds? Are high street savings accounts enough? 

I’d like my side of the portfolio to be around 80/20 equites to bonds or bond equivalents next time I rebalance.

The main use of bonds in a 80/20 portfolio is to reduce the volatility of the equity. For example if equity crashes 50% the portfolio would drop 40%.  Whether the diffenence is worth the effort is up to you.  If you are investing for the long term, say  > 10 years, and would not panic and sell the lot after a fall of 50% I dont see a great need for bonds, especially as low an amount as 20%.

I cant see a bank savings account is a suitable for replacement for bonds since rebalancing would require moving cash in and out of tax sheltered accounts.  You cant do it with a LISA or a 

Thanks Linton. Our intention is to start drawing from the portfolio in around 15 years.

Albermarle

These threads may be of interest.
Is now a good time to buy more Bonds? — MoneySavingExpert Forum
Suggestions for Bond funds to de-risk into retirement — MoneySavingExpert Forum

GazzaBloom

Personally, if it were me, with 15 years to go, I would keep the investment portfolio as it is in 100% equities and focus more on other financial aspects such as mortgage (if you have one), increasing tax efficient accumulation of savings such as via pension salary sacrifice, paying off any debts, etc. making sure you are getting the best deals on phones, energy, TV subscriptions etc.

If you really are set on moving to 80/20 now then I would just buy a low cost bonds index fund to sit alongside the equities or move to a single multi asset fund that has 80% equities such as VLS80.

Not advice, just opinion

mooneysaver

GazzaBloom said:

Personally, if it were me, with 15 years to go, I would keep the investment portfolio as it is in 100% equities and focus more on other financial aspects such as mortgage (if you have one), increasing tax efficient accumulation of savings such as via pension salary sacrifice, paying off any debts, etc. making sure you are getting the best deals on phones, energy, TV subscriptions etc.

If you really are set on moving to 80/20 now then I would just buy a low cost bonds index fund to sit alongside the equities or move to a single multi asset fund that has 80% equities such as VLS80.

Not advice, just opinion

My thoughts exactly, with fifteen years to go you could definitely extend your mortgage to fund the best phones and TV subscriptions

CheekyMikey

At your age I wouldn’t be considering adding anything but equities to my portfolio for another 20 years…that’s what I did and it worked for me, but do what you feel comfortable doing.