Bond funds or ETFs

pip895

I am currently doing a bit of house keeping on my portfolio.  I have decided I should increase my bond exposure.  Currently I have my limited exposure split between Invesco Perpetual Tactical bond, Vanguard Global Agg Bond Acc. (VAGS) and iShares £ Corporate Bond 0-5yr (IS15).  I am considering selling the Tactical Bond, increasing the others and adding iShares Core UK Gilts (IGLT).  This is in part on cost grounds as I am on a platform that charges more for funds.  All the funds are wrapped - SIPPs & ISAs.

A bit of background - I am retired and living of my investments (about 70% of my income is coming from them at present) My investible capital is split 60% Equity 40% Other.  The Other includes bonds, Cash, WP funds (PNL etc) and a little Gold. I will be transferring money from cash and WP funds into bonds.

My question is does this selection seem a sensible move, are there better funds I should consider - will this leave me with glaring gaps in my bond exposure?  

aroominyork

Without knowing the split between the assets or what the other bonds are, I see nothing wrong with a global aggregate bond, gilts and a short term corporate bond. Cheap and diverse with no glaring gaps.

pip895

aroominyork said:

Without knowing the split between the assets or what the other bonds are, I see nothing wrong with a global aggregate bond, gilts and a short term corporate bond. Cheap and diverse with no glaring gaps.

Thanks for that - I previously had a fairly token 5-6% in bonds (excluding those invested for me in WP funds) basically because I didn't fully understand them, and they they looked terrible value. I am now moving to a position where they form the largest part of my Non equity portfolio so over 12% of my total investable assets.  Would you think the allocation between the three I have chosen should be fairly even, or should more go in the Global aggregate than the gilt fund for instance? 

aroominyork

Everyone will have a different view and just 'cos I was first to reply doesn't mean my view is worth more; plenty of people here are better informed than me. That said... I use the OEIC verson of VAGS as a benchmark to see how my bonds are doing so it is my 'starter' position. Similar to you I have three flavours of bond: global aggregate, gilts, sterling corporate bond. I think the UK is returning a bit more than global at the moment so I see no harm in overweighting the UK, but it's really your choice. Here again, nothing you are doing seems wrong. That said, plenty of people take the view that bonds should only mean govt bonds/treasuries/gilts. This is a nice read; his conclusion is that there is not a global govt bond fund (he is Vanguard only so cannot use IGLH) and an aggregate bond like VAGS performs similarly.

Aged

aroominyork said:

This is a nice read; his conclusion is that there is not a global govt bond fund (he is Vanguard only so cannot use IGLH) and an aggregate bond like VAGS performs similarly.

Judging from the comments, this is not a recent article - does it still apply post the bonds 'armageddon'?

aroominyork

Aged said:

aroominyork said:

This is a nice read; his conclusion is that there is not a global govt bond fund (he is Vanguard only so cannot use IGLH) and an aggregate bond like VAGS performs similarly.

Judging from the comments, this is not a recent article - does it still apply post the bonds 'armageddon'?

If anything it applies more. Before the rate rises (or 'armageddon' as you call it) plenty of people saw bonds as offering return-free risk and avoided them (or just held short duration). Now that bonds are again offering decent returns, this article is perfectly logical.

pip895

Aged said:

aroominyork said:

This is a nice read; his conclusion is that there is not a global govt bond fund (he is Vanguard only so cannot use IGLH) and an aggregate bond like VAGS performs similarly.

Judging from the comments, this is not a recent article - does it still apply post the bonds 'armageddon'?

I noticed that - must say I was very pleased I didn't hold much in VAGS and none at all in IGLT during that period.  Hopefully we are entering a more normal period for bonds though..