Best bonds' fund for nearing retirement

Euro_Skank

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

I did read about a study (Beyond the Staus Quo: A Critical Assessment of Lifecycle Investment Advice) that recommended 100% equities (33% US, 67% intl.) for life, but was strongly advised against it by several concerned posters.   
TIA! 

dunstonh

 A Critical Assessment of Lifecycle Investment Advice) that recommended 100% equities (33% US, 67% intl.) for life, but was strongly advised against it by several concerned posters.   

This is a UK website aimed at UK consumers.  You are referencing a US study for US investors operating in Dollars.     

Are you based in the US or the UK?  If UK, then why are you looking at US studies?

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

What bonds are you referring to?
What is the objective for the bonds?  e.g. is it to hedge against annuity rates?

aroominyork

I mean this in the nicest possible way, dunstonh, but your posts recently are quite often tending to say "for God's sake sort yourself out". If advice to US investors to go 100% equities is not appropriate to UK investors, it might be helpful to explain why that is so. 

nigelholl2

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.
TIA! 

As a newbie to posting but a long-time lurker on this forum, I have seen comments which didn't seem right, but then the initial question could have been worded better too. 

So if you could confirm you circumstances, e.g. where you live/pay taxes & time till you want to start drawing down on funds

I can't offer financial advice, but I am more than willing to share the funds I have used, after significant research, and rumination for several months, it may cause some comments, but at least it will give you a starting point to start your own research, which I did from a blank piece of paper.

wait to hear from you

jimjames

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

How close to retirement are you? If I was 50 with a 55 retirement target I certainly wouldn't move my entire portfolio into bonds but having sufficient cash for a few years would make sense

masonic

jimjames said:

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

How close to retirement are you? If I was 50 with a 55 retirement target I certainly wouldn't move my entire portfolio into bonds but having sufficient cash for a few years would make sense

OP's previous thread may give some context: https://forums.moneysavingexpert.com/discussion/6639743/would-this-strategy-of-100-equities-work

Even with the willingness to be flexible on lifestyle/spending, a planning to use a 4.3% withdrawal rate from the proposed 100% equities + 22 month cash buffer is brave.

The trouble with adding bonds is that it will improve the baseline return but reduce the average return. It won't do much for the success rate if the starting pot is too small. The number of years retirement before state pension kicks in will be key factor. After that the withdrawal rate becomes more reasonable.

Edit: The rental income described in this thread actually may make all the difference, and that thread also suggests age ~53 and perhaps looking to pull the trigger in the next few years. Probably worth getting final couple of years NI for state pension.

chiang_mai

jimjames said:

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

How close to retirement are you? If I was 50 with a 55 retirement target I certainly wouldn't move my entire portfolio into bonds but having sufficient cash for a few years would make sense

I agree, even at age 75 I wouldn't move entirely into bonds. I think it's important to keep some percentage of your portfolio working, to increase the value of your holdings. The problem of course is that we don't know how long we each will live, nor what future financial challenges we may encounter. Trying to determine the correct mix of equities bonds and other things is not easy and probably needs to be adjusted periodically, over the course of a 30 year retirement period.  I am 75 and now hold 40% equities, 30% bonds and the rest in cash like instruments. The challenge that I will face next year is discovering ways to maximise my income whilst still maintaining the same level of drawdown, without increasing risk, beyond my threshold. If it helps the op at all, I have seven years of income set aside, from my investment portfolio, but this doesn't include other pension or other investment income, all of which is separate.   

OldScientist

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

I did read about a study (Beyond the Staus Quo: A Critical Assessment of Lifecycle Investment Advice) that recommended 100% equities (33% US, 67% intl.) for life, but was strongly advised against it by several concerned posters.   
TIA! 

Echoing an earlier comment. What are the bonds for?

If you are going to use your portfolio for drawdown, then a mix of very short (cash-like such as STMMF) and intermediate bond funds (perhaps those with maturities around the 5-10 year mark) might be appropriate. If you want international diversification in your fixed income as well as your equities, then a global bond fund would be a good choice.

If you want to purchase an annuity, then holding UK fixed income (possibly both cash and a gilt fund) with an average maturity (technically duration) close to that of the annuity (very roughly half the life expectancy at purchase plus the time until purchase) would probably be more appropriate. This is the approach that was often used in 'lifestyle' type funds where an annuity purchase was expected.

Alexland

I saw your concern in your 100% equities thread that when looking at a bonds fund the "performance looked dismal; from what I could see it had actually lost money every year for the last five years" but yes that's typically what you would expect when looking at bonds right now.

Bonds were massively overpriced in the period of near zero interest rates as buyers were bidding up their pricing pulling their return forward. Anything gets risky if you pay too much and some of us were warning at the time they were a 'return free risk'.

However now they have crashed back to reasonable valuations they are attractive again. Sure they might not do as well as equities in the very long term (although equities are looking overvalued now which seems likely to affect their medium term return) but bonds can still give an attractive rate of return to underpin a drawdown strategy.

In particular index linked gilts are offering a circa 2% above inflation return if held to redemption. You can get them via a fund/ETF but it gives you less certainty as the portfolio churns with shorter dated funds maturing and longer dated ones being purchased by the fund manager. I think it is better to hold them directly in a ladder of offset maturity dates to avoid the fund manager cost and get certainty of outcome.  At current prices they should support a 4%+ drawdown rate (depending on your retirement age) with a stable inflation linked income stream in retirement.

However I would still suggest a proportion of equities in the portfolio just incase the government somehow don't honour their commitments eg they are already changing the measurement of inflation away from RPI which was very favourable.

Eyeful

Euro_Skank said:

Following on from a previous question, can anyone recommend the best fund for bonds please? Ideally available to purchase as part of my SIPP through Halifax Share Dealing.

I did read about a study (Beyond the Staus Quo: A Critical Assessment of Lifecycle Investment Advice) that recommended 100% equities (33% US, 67% intl.) for life, but was strongly advised against it by several concerned posters.   
TIA! 

The title of your post suggests you are nearing retirement.
If that is indeed the case I suggest to you look into "Sequence of Risk". 
This James Shack video should help you understand it:

https://www.youtube.com/watch?v=oyzR7tMmj9o

DrSyn

Euro_Skank

We all have different risk levels, size of pension pots & outgoings etc.

Someone who is adventurous, has a pension pot of £10M & out goings of £100K a year,
might be happy with 100% equities.Even if the markets fall by 50%.

For most pensioners in the UK, having 100% in equities in the words from "Yes Minister" 
" A very adventurous position  minister".  

Which was why you where strongly advised against it by several concerned posters.