gilts and corporate bonds

jon3001

Assume that cash has a 5% return and 0% std dev.

Here are some sample 3yr returns and SDs: (Morning Star)
L&G All Stock Gilt Index Trust: 1.94%, 3.93%
Invesco Perpetual Corp Bond: 1.94%, 2.97%
Invesco Perpetual High Income: 10.96%, 14.84%

Granted, it's a small sample and history.

Which of these funds have been closer to the lower risk, lower returns of cash? Which has had the higher probability of making a substantial loss (e.g. 10%+) is any given year?

cheerfulcat wrote: »

You can lose capital as easily as with equity-based funds.

What does this mean exactly? That they can simply make a loss (e.g. 1p) in any given year? Or that the magnitude and probability of potential losses is on par with equities?

cheerfulcat wrote: »

But would you seriously suggest that danster moves all of his or her investments into corporate bond funds now? Especially given the assumption that this is " as close to cash savings as possible "?

I'd never advocate using a single asset class. Efficient frontier analysis suggests around 10% equities minimum even for highly risk-adverse investors. The porfolio make-up should reflect the investors objectives and risk tolerance. I'm not a market-timer either but if one suddenly wanted to minimise downside risk and volatility then moving funds aways from equities into high-quality, interest-generating assets has been a statistically sound move.

carlrom

Another option is to buy money market funds. Most of them provide a decent return, not far from the average savings account, and they can be bought within an ISA wrapper. There are some examples on ProactiverSaver.

--> When investing, always do your homework <---