5-10 Year Recommendation

aroominyork

poseidon1 said:

SVaz said:

If a big drop would worry you then maybe £2k a month x 10, then if there is a drop early on you will be buying funds at a cheaper price. 

If all you want is to keep pace,  why are you risking investing?
A mixed asset fund with low equities might not keep up with inflation over 5 years.
As I said before,  an index linked Gilt will keep it’s true value over whichever term you choose. 

I would suggest that index linked gilts are at the complex end of fixed income investing. Therefore unsuitable for newbie investors without professional advice from a stockbroker or other suitably qualified wealth managers . 

I certainly would not be looking at index link gilts if I only had a modest  £20k to invest over the OP's time horizons and very much doubt any wealth manager would want to advise on such a small amount.

I don't agree about ILGs being so complex. If the OP has a maturity date in mind, they can buy and hold an ILG to maturity. The real yield in the right column is the return over inflation. 

Alternately there is this fund, although it is more exposed to interest rate changes https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/ishares-up-to-10-years-index-linked-gilt-index-s-accumulation

Yorkie1

aroominyork said:

poseidon1 said:

SVaz said:

If a big drop would worry you then maybe £2k a month x 10, then if there is a drop early on you will be buying funds at a cheaper price. 

If all you want is to keep pace,  why are you risking investing?
A mixed asset fund with low equities might not keep up with inflation over 5 years.
As I said before,  an index linked Gilt will keep it’s true value over whichever term you choose. 

I would suggest that index linked gilts are at the complex end of fixed income investing. Therefore unsuitable for newbie investors without professional advice from a stockbroker or other suitably qualified wealth managers . 

I certainly would not be looking at index link gilts if I only had a modest  £20k to invest over the OP's time horizons and very much doubt any wealth manager would want to advise on such a small amount.

I don't agree about ILGs being so complex. If the OP has a maturity date in mind, they can buy and hold an ILG to maturity. The real yield in the right column is the return over inflation. 

Alternately there is this fund, although it is more exposed to interest rate changes https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/ishares-up-to-10-years-index-linked-gilt-index-s-accumulation

As someone whas been reading the forum for years, and tried unsuccessfully to get my head around ILGs many times, and isn't too scared at looking at numbers, I must say that for some people ILGs are complex! 

leosayer

magd36 said:

What are people's recommendations for a provider and fund for a S&S ISA that has low fees and only needs to try and match inflation over a 5-10 Yr Period. Thanks

Can you give details about why you have stated this particular time period?

Or can you be more precise about the number of years?

What happens after the 5-10 years?

The more precise you can be about the timeframe, the better chance you will have of meeting your goal.

aroominyork

Yorkie1 said:

aroominyork said:

poseidon1 said:

SVaz said:

If a big drop would worry you then maybe £2k a month x 10, then if there is a drop early on you will be buying funds at a cheaper price. 

If all you want is to keep pace,  why are you risking investing?
A mixed asset fund with low equities might not keep up with inflation over 5 years.
As I said before,  an index linked Gilt will keep it’s true value over whichever term you choose. 

I would suggest that index linked gilts are at the complex end of fixed income investing. Therefore unsuitable for newbie investors without professional advice from a stockbroker or other suitably qualified wealth managers . 

I certainly would not be looking at index link gilts if I only had a modest  £20k to invest over the OP's time horizons and very much doubt any wealth manager would want to advise on such a small amount.

I don't agree about ILGs being so complex. If the OP has a maturity date in mind, they can buy and hold an ILG to maturity. The real yield in the right column is the return over inflation. 

Alternately there is this fund, although it is more exposed to interest rate changes https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/i/ishares-up-to-10-years-index-linked-gilt-index-s-accumulation

As someone whas been reading the forum for years, and tried unsuccessfully to get my head around ILGs many times, and isn't too scared at looking at numbers, I must say that for some people ILGs are complex! 

I both agree and disagree. ILG index ratios can indeed make your brain fry. But if you plan to hold to maturity and understand what the real yield is telling you - the expected return above inflation - isn't it OK to park the maths and just have your eye on the final prize?

SVaz

If IL Gilts are too complex then why not use ordinary Gilts?
A 5 year Gilt, maturing in 2030 is paying 4.75% coupon ( interest)  
So £20k will get £950 in coupons per year x 5 = £ 4750
If you bought at £1 each ( prices change)  you would get £20000 back plus £4750, so 
£24750 , plus any interest on the coupon cash ( probably another £150ish) if you stuck it in a short term money market fund. 

For comparison : 

A 5 year fixed savings account paying 3.85% compounded for 5 years gives £ 24200.   Around £700 less.  

magd36

leosayer said:

magd36 said:

What are people's recommendations for a provider and fund for a S&S ISA that has low fees and only needs to try and match inflation over a 5-10 Yr Period. Thanks

Can you give details about why you have stated this particular time period?

Or can you be more precise about the number of years?

What happens after the 5-10 years?

The more precise you can be about the timeframe, the better chance you will have of meeting your goal.

I am about to retire. If all goes as planned I won't need to use this money for 10 years. I said 5-10 in case I need it before then. I will likely need it after 10 years to supplement DB and state pension. If I could match inflation I'd be comfortable so no need to risk anything. My previous experience with investments has not been great. A company share option scheme that collapsed, an endowment mortgage that I won a misselling claim against after it failed versus the promise and finally a DC pension with Standard Life that has been unremarkable in performance. 

magd36

SVaz said:

If IL Gilts are too complex then why not use ordinary Gilts?
A 5 year Gilt, maturing in 2030 is paying 4.75% coupon ( interest)  
So £20k will get £950 in coupons per year x 5 = £ 4750
If you bought at £1 each ( prices change)  you would get £20000 back plus £4750, so 
£24750 , plus any interest on the coupon cash ( probably another £150ish) if you stuck it in a short term money market fund. 

For comparison : 

A 5 year fixed savings account paying 3.85% compounded for 5 years gives £ 24200.   Around £700 less.  

Probably too complex for me but I will look in to it. Thanks.

magd36

Albermarle said:

Sam_666 said:

If you only want to match inflation, stick to savings accounts only.
Waste of time in my opinion, when you could be making 15% per year on S&P. Pesnion is even better option, but you didnt mention age or existing plan.

Remember many people are scared of investing, or at least mildly nervous.
So going head first into a highly concentrated index tracker, that could drop precipitously at any moment,  is not for most people.

I agree, its a strange suggestion. Thanks

magd36

El_Torro said:

InvesterJones said:

Sam_666 said:

If you only want to match inflation, stick to savings accounts only.
Waste of time in my opinion, when you could be making 15% per year on S&P.

If the OP's goals are met by them only needing to match inflation, why would you recommend they take on more risk? 

Agreed. A couple of other points:

Suggesting that the S&P 500 will return 15% a year over the next 5 to 10 years is being a bit optimistic. 

Savings accounts are also unlikely to match or beat inflation over the same time period. 

Agree. Thanks

SVaz

Not complex at all. 

You buy 20000 gilts that mature in whichever year you choose in your ISA. 

If you want 10 years then T35 is currently just under £1 each so will cost a little less than £20k.

It will pay 4.5% fixed so £900 x 10 years , 2 payments a year of £450 each.  

That’s £9000 in interest plus exactly £20k back in March 2035. 

What’s complicated about that?

If you take that £900 a year and put it in a savings account then that’s another £300+  in interest too.