Any views on the relevance of Gilts in a modern portfolio?

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  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
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    A_T wrote: »
    In today's chase-for-growth culture gilt funds are very unfashionable

    Good Lord, I wouldn't buy a gilt fund. When we held gilts they were actual gilts.
    dividendhero wrote: »
    UK government debt is still growing and one day the temptation to give gilt holders a "haircut" will prove too great

    Any haircut is likely to be by inflation. Perhaps buy some gold too.
    Free the dunston one next time too.
  • A_T
    A_T Posts: 959 Forumite
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    dividendhero wrote: »
    Personally I wouldn't touch them with a bargepole, UK government debt is still growing and one day the temptation to give gilt holders a "haircut" will prove too great

    If things get to that stage then the value of gilts will be the least of our problems.
  • dividendhero
    dividendhero Posts: 2,417 Forumite
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    A_T wrote: »
    If things get to that stage then the value of gilts will be the least of our problems.

    The haircut on gilts will be done by simply creating inflation
  • Linton
    Linton Posts: 17,173 Forumite
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    Thrugelmir wrote: »
    DMO appears to have no problem in issuing new stock. Ten year stock at 1.625% at just over par value.


    You may as well use NS&I PBs and fixed rate accounts for similar rates at zero risk. I would not hold gilts at the moment as it seems to me that there is too much risk for minimal benefit.
  • Reluctantpensioner
    Reluctantpensioner Posts: 140 Forumite
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    dunstonh wrote: »
    What gilts have you got?
    I've held the following for several years.
    Aviva Index-Linked Gilt S6 Pen
    Aviva Long Gilt S6 Pen
    L&G PMC >5 Yrs IdxLnkd Glts Idx 3 Pen
    L&G PMC(LGIM) >15 Yrs Gilts Index Pen

    I am currently consolidating all my investments. L&G are sold, Aviva will go later in the year.
    This requires me to examine every holding in my portfolio, and their relative weightings.
    The performance of Gilts at the moment, and the outlook reports I've read, makes me think I should lower the weighting. (I was never thinking of dropping them altogether, though I have seen balanced portfolios without them).
    dunstonh wrote: »
    Corporate bonds have reduced a little and high yield bonds slightly increased. But you don't mention them.
    Only so the question was kept simple. Yes, I have Corporate, High Yield and Global in the portfolio.

    Arguably I should have phrased it differently:
    Are you lowering the weighting of Gilts, and what are you replacing them with?
    They are off the boil, are they going to come on again? Hold or Switch.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Linton wrote: »
    You may as well use NS&I PBs and fixed rate accounts for similar rates at zero risk. I would not hold gilts at the moment as it seems to me that there is too much risk for minimal benefit.

    Depends how much cash you are holding.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    A_T wrote: »
    And new issues are always hugely oversubscribed.

    Currently is the word I would use. ECB and BOJ aren't going to maintain buyback policies indefinately.
  • schiff
    schiff Posts: 20,099 Forumite
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    This is a headline from Trustnet:

    "LGIM asset allocation head: The end of the “spectacular bull market” is coming closer
    13 August 2018

    Emiel van den Heiligenberg and other experts at LGIM explain why investors would be wise to start preparing for the end of the bull run."

    That, and the comments in this thread, have made me think!

    My largest investment is in a £ Strategic Bond. I have the equivalent in accessible cash. It has lost me money (capital value down 8% in the last year) but I have not been bothered enough to do something about it; I know I should have. It is in an ISA and produces on current values about 4% pa. Income is paid out quarterly and is large enough to meet some of my heavier bills that occur at the same sort of time. So, it is 'convenient'.

    I have a similar sum in S&S Funds ISAs - in Fidelity and Co-Funds.

    Rather than move my Strategic Bond money to something more exciting which is tempting, like one of the Vanguard LifeStrategy funds, which I know I shouldn't because of my age, it could be better to move it to a better performing collection of Bond Funds.

    I would be happy with 4% income and a bit of modest growth. Is there something out there that would fit the bill?

    And my final point going back to those headlines, if in fact that scenario is likely, coupled with the comments on this thread, IF that is how it turns out, what effect would it have on the market price of the corporate and government bonds in which my Bond is invested? Up or down?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    schiff wrote: »

    And my final point going back to those headlines, if in fact that scenario is likely, coupled with the comments on this thread, IF that is how it turns out, what effect would it have on the market price of the corporate and government bonds in which my Bond is invested? Up or down?

    Ultimately the bonds your manager holds will mature. If you bought in at a price higher than par. Then you'll suffer a capital loss. More noticable if you are withdrawing the income rather than reinvesting. The bond markets like the equity markets have had a sustained bull run (though over many decades). There's few places to shelter if you expect a fall out.
  • thrifty_pete
    thrifty_pete Posts: 307 Forumite
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    Are Gilt / Government Bonds (and the funds made up of them should you invest that way) really something for someone willing to buy and sell to try to beat the rates on savings banks accounts? Perhaps akin to individual shares rather than simply owning a tracker fund?
    I have an equity portfolio (shares and global tracker funds) and my diversification is simply fixed rate savings account (cash). Do I need to bother with Government bonds at all?
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