A case for bonds?

valuepack

Hi all

I'm new to investing. I'm hoovering up as much educational info online as I can manage and I understand that for my portfolio to be truly diversified across all asset classes, it would be prudent to have some exposure to bonds.

My current portfolio is this:

69% Equities (global ETF)
20% Gold (physical vaulted)
10% Cash (instant access savings)
1% Crypto (BTC)

I have no direct exposure to property, other than our home (mortgaged).

I'm looking at bonds, and while I understand the concept, I just can't see a case for investing in them at the moment.

If I were to invest in gilts, I'd get less return than my cash savings.

If I were to invest in corporate bonds, I'd be exposing myself to credit risk anyway, but capping the return.

I'm doing ok but I want true diversification across asset classes.

Please can people tell me what I'm missing here?

Can someone point me to some good independent source material on bonds?

Thanks

Eyeful

Is this of any use to you?
https://www.youtube.com/@Pensioncraft/search?query=Bonds
https://www.kroijer.com/

akm2018

valuepack said:

 I understand that for my portfolio to be truly diversified across all asset classes, it would be prudent to have some exposure to bonds.

...

I'm looking at bonds, and while I understand the concept, I just can't see a case for investing in them at the moment.

If I were to invest in gilts, I'd get less return than my cash savings.

If I were to invest in corporate bonds, I'd be exposing myself to credit risk anyway, but capping the return.

I'm doing ok but I want true diversification across asset classes.

Some of this is at odds with other parts

So you understand you want to be diversified, but do you understand why? It's so that the same thing doesn't happen to your whole portfolio at once.

The point of bonds (in theory) is that as an asset class they provide a lower-risk asset class than equities, at the cost of a lower return. And, crucially, an uncorrelated or even anti-correlated return. So, when equities go down bonds go up (and vice versa).

Whether any of that is true in practice is another matter - certainly in recent years this anti-correlation hasn't been doing what it's supposed to...

PhoneBook

Try this . . .   https://www.hl.co.uk/learn/diversification

wmb194

valuepack said:

Hi all

I'm new to investing. I'm hoovering up as much educational info online as I can manage and I understand that for my portfolio to be truly diversified across all asset classes, it would be prudent to have some exposure to bonds.

My current portfolio is this:

69% Equities (global ETF)
20% Gold (physical vaulted)
10% Cash (instant access savings)
1% Crypto (BTC)

I have no direct exposure to property, other than our home (mortgaged).

I'm looking at bonds, and while I understand the concept, I just can't see a case for investing in them at the moment.

If I were to invest in gilts, I'd get less return than my cash savings.

If I were to invest in corporate bonds, I'd be exposing myself to credit risk anyway, but capping the return.

I'm doing ok but I want true diversification across asset classes.

Please can people tell me what I'm missing here?

Can someone point me to some good independent source material on bonds?

Thanks  

You can use cash savings as a proxy, you don't have to buy gilts or other types of bonds.

InvesterJones

It also very much depends what gilts you were looking at - there are plenty around with a much higher coupon than is available via cash savings - however I'd really echo the point about diversification - looking at everything that is performing well at the same time now is not necessarily the point. Bonds can perform quite differently to cash (in a falling interest rate scenario for example), but both diversify equities.

valuepack

Thanks everyone for replying. It really is specific sources of educational info about bonds that I'm asking about rather than diversification, but I appreciate the replies.

I'll keep some extra money in cash while I investigate bonds further.

I don't fancy corporate bonds or foreign government bonds at my current level of understanding, not that I'd know how to get into them.

I do like Ramin but I feel that he loves bonds more than he should!

Any links to useful sources of bond info would be much appreciated.

Thanks all

Ch1ll1Phlakes

Don't know if this is exactly what you're looking for but Monevator is often a good place to start
A brief* guide to the point of bonds - Monevator
Plenty of other links within that article to possible things you are querying.