Bonds and Misery

BlisteringBarnacles

So far I had very little bonds in my portfolio. 50% equities 50% cash. The little bonds (bond funds) I had took a million years to produce any return.

But I have been thinking about having a generally recommended 50-50 stock bond portfolio.

In spite of my money market funds cruising along and generating nice returns I went in and bought IGLA just now few minutes ago in my SIPP : ishares global govt bond UCITS ETF USD ACC : within minutes it has plummeted 1.1% - just lost £1000 on 91,000 investment

I know it’s long term and all that. But Bonds oh God ! Nothing but misery in my life.

Yes I did read this article earlier : https://occaminvesting.co.uk/the-best-vanguard-bond-funds-for-uk-investors/

Hmmm

eskbanker

BlisteringBarnacles said:

But I have been thinking about having a generally recommended 50-50 stock bond portfolio.

I'm not aware of any generalisations along those lines, but it's far more important to go with what's right for you....

masonic

IGLA fell from $4.59 to $4.58 per share momentarily, but has now recovered. Any greater loss you are seeing is the result of bid-offer spread, forex and trading fees.

If bonds make you miserable, you don't have to hold them. Money market funds and cash are a viable alternative depending on your objectives.

booneruk

BlisteringBarnacles said:

 within minutes it has plummeted 1.1% - just lost £1000 on 91,000 investment

I'm pretty sure this is just a factor of bid/offer spread and liquidity levels. You've only lost money if you decide to sell straight away. 

Eyeful

1. Thought that the often quoted long term split for retirement was, shares(60%)/bonds(40%).

2. You do not have to hold bonds, you could stick to money market funds or cash.

3. Investing is for the long term (say at least 10),so ignore short term movements. Look once a year instead.

4. You could take the simple approach, use either
(a) Target Day Fund to control your glide into retirement,
Example: https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds
(b) Low cost Global Multi Asset Fund.
This gives you a ready made portfolio, you just chose the share/bond split that you are comfortable with.
Example: https://www.hsbc.co.uk/investments/products/hsbc-global-strategy-portfolios/#balanced

HHarry

Funnily enough I watched this video yesterday. I think it’s referring to a US study, which may not be UK relevant, and as always anyone can post anything in Youtube.  The clickbait title asks if the 60/40 portfoilio is dead - summary it’s potentially not the clear cut winning strategy that it’s touted to be.

https://www.youtube.com/watch?v=vqMlBEBLd9I

I’m close to 100% equities, but hold considerably more cash than would usually be deemed prudent.

InvesterJones

eskbanker said:

BlisteringBarnacles said:

But I have been thinking about having a generally recommended 50-50 stock bond portfolio.

I'm not aware of any generalisations along those lines, but it's far more important to go with what's right for you....

Completely echo this. What is it YOU (the OP) need from bonds? And why do you need 50:50? Cash,or cash-like holding may have been doing the job just fine - see timely pensioncraft video about this here:

 https://www.youtube.com/watch?v=e_xp4IENK40

Albermarle

HHarry said:

Funnily enough I watched this video yesterday. I think it’s referring to a US study, which may not be UK relevant, and as always anyone can post anything in Youtube.  The clickbait title asks if the 60/40 portfoilio is dead - summary it’s potentially not the clear cut winning strategy that it’s touted to be.

https://www.youtube.com/watch?v=vqMlBEBLd9I

I’m close to 100% equities, but hold considerably more cash than would usually be deemed prudent.

So in reality you are not 100% equity, if you look at your overall situation and include any cash over and above the usual emergency fund level.

dunstonh

 The clickbait title asks if the 60/40 portfoilio is dead - summary it’s potentially not the clear cut winning strategy that it’s touted to be.

Things move quickly and they can get dated on the internet but left up for all to see.    In many cases, they are behind the events.

The undoing of QE was always going to hurt bonds.  And that played out between Nov 21 and Oct 23.   Now they are back to their ballpark range.    So, looking ahead, the risk event (which was the worst for over 100 years with gilts) has been and gone.

masonic

HHarry said:

I’m close to 100% equities, but hold considerably more cash than would usually be deemed prudent.

I've taken a similar approach, essentially using cash as a bond-proxy, but still almost 90% equities. Not a suitable risk level for most.

BlisteringBarnacles

Thanks for the replies.

apologies for overreacting. This was my first major bond fund/etf purchase. Just a few points :

- AA : I was referring the old "Age in bonds", or at least some portion in fixed income. I was comfortable with 50/50 or even 60/40.
- Bonds vs cash : I thought bonds are better than cash over long term (say 7 years plus). Also, when equities tank, bonds are supposed to give some ballast - in theory anyway right ?

- Target date/lifestrategy funds : I would have gone for Vanguard Lifestrategy but don't particularly like the UK bias. I wish Vanguard provided a global lifestrategy with no country bias. Then that is the one fund I would choose.

The HSBC one is good (thanks) but it is actively managed, am I right ? I prefer passive.  

So the question is how to invest in bonds (similar to a simple global equity tracker for equities). I went thru https://occaminvesting.co.uk/the-best-vanguard-bond-funds-for-uk-investors/ and then made a decision to split my bond holding between iShares Global Government Bond UCITS ETF USD Accumulating(IGLA) and Vanguard Global Bond Index Fund ACC (or its ETF version). Getting jittery since it was my first large purchase of bonds.

Thanks