The Lemon Fool

Hi All,

I have a 75% Equity / 25 % Fixed Income SIPP portfolio

I have 75% of my portfolio invested in pure Equity funds.
I am concerned about the 25% Fixed income portion of the portfolio following all of the recent news of Bonds falling in value which has recently accelerated following possible Donald Trump USA reflation and USA (0.25%) rate rise.

The 25% Fixed income / Bond portion of the portfolio is currently invested in :-

5% IS15 0-5 year Corporate Bond ETF (@0.2 ocf)
5% IPE Invesco Perpetual Enhanced Income Limited
5% HDIV Henderson Diversified Income
5% NCYF New City High Yield
5% SLI Standard Life Inv Prop Inc Trust Ltd(Commercial Property)


Will the recent Government Bond sell off also affect the above (Corporate, HY, Property ITs') as well. Should I consider switching part of this 25% Fixed Income portion to Cash ?

Regards

Tim

I asked a similar question a few weeks ago and the concensus seems to be that nobody knows the answer!

viewtopic.php?f=8&t=750

Karen

Peltiq wrote:I asked a similar question a few weeks ago and the concensus seems to be that nobody knows the answer!

"Prediction is very difficult, especially if it's about the future." (Niels Bohr)
"If you can look into the seeds of time, and say which grain will grow and which will not, speak then unto me." (William Shakespeare)
"He who lives by the crystal ball soon learns to eat ground glass." (Edgar R. Fiedler)

But you want an answer? Ok. Sell. They're going to go down.

"It is often said there are two types of forecasts ... lucky or wrong!!!!" (Anon)

(Lots more at http://www1.secam.ex.ac.uk/famous-forec ... otes.dhtml)

Nobody can predict the movement of equity and bond markets so my advice would be to select a level of the mix with which you feel most comfortable and then rebalance to maintain this mix when it becomes out of balance.

I actually hold the Vanguard Lifestrategy 60 fund (60% global equities and 40% assorted bonds) and this is auto rebalanced which means I do not have to think about it when equities go up. Its an ideal fire-and-forget fund for me.

Thanks,

I think the so called bond bubble applies to long / Medium Government Bonds & Bond funds rather than HY and property ?

I note that the following still appear in John Barron's Autumn & Winter portfolio's

IPE Invesco Perpetual Enhanced Income Limited
HDIV Henderson Diversified Income
NCYF New City High Yield
SLI Standard Life Inv Prop Inc Trust Ltd(Commercial Property)

However, he did trim down and sell his longer dated Corporate Bonds (SLXX and ISXF) a few months ago which reduced the overall Bond weighting in his portfolio's

TimR

TimR wrote:I think the so called bond bubble applies to long / Medium Government Bonds & Bond funds rather than HY and property ?

If bonds are doing badly, i.e. yields are increasing, then other yield-oriented securities will also tend to do worse.

As an example, since Trump was elected the 10-year US bond yield has increased by about 40%, and by 60% since the summer low. The 30-year T-bond yield has almost doubled. These are huge moves.

Correspondingly, the worst performing equity sectors have been the yield plays - property, utilities and staples.

If you play the yield hunger games then you need to look out below. The Fed just hiked a quarter and could be in for three more hikes next year. I'd look instead for what might do well with a steeper yield curve - financials in particular, which after a decade in the doldrums are surely worth a punt.

Lootman wrote:

TimR wrote:I think the so called bond bubble applies to long / Medium Government Bonds & Bond funds rather than HY and property ?

If bonds are doing badly, i.e. yields are increasing, then other yield-oriented securities will also tend to do worse.

As an example, since Trump was elected the 10-year US bond yield has increased by about 40%, and by 60% since the summer low. The 30-year T-bond yield has almost doubled. These are huge moves.

Correspondingly, the worst performing equity sectors have been the yield plays - property, utilities and staples.

If you play the yield hunger games then you need to look out below. The Fed just hiked a quarter and could be in for three more hikes next year. I'd look instead for what might do well with a steeper yield curve - financials in particular, which after a decade in the doldrums are surely worth a punt.

Perhaps if the yield curve is going continue steepening the with possible losses from medium and long bonds should consider moving my 60/40 portfolio towards a Warren Buffet 90/10 portfolio with only the 10% in very short dated Gov Bonds (IGLS or GLTS) as a just in case the market tanks.