JohnW wrote:hiriskpaul wrote:The advantage of a gilt ladder compared to a deposit ladder though is that of liquidity. Gilts can be sold instantly,
Well, you don’t need liquidity with a non-rolling ladder. Secondly, if you have to sell during rising interest rate times you’ll lose capital. Yuk.
In theory yes. Unfortunately life doesn't always go totally according to plan.
One way to mitigate the liquidity risk is to hold a sum in instant access accounts. You can get up to 0.45% on instant access, so still currently better than with 5y gilts held to maturity. This also has the advantage that if interest rates started to rise, you may end up better off than you would have done had you locked in a fixed rate. The risk is that if interest rates stay the same or drop you will lose out compared to taking fix rate term deposits.
Personally I keep most of our cash on instant access, although this has become a problem now that NS&I pay such derisory rates. That allows me to take advantage of short term opportunities as they arise - mostly with options trading, but also with short dated high yield bonds and similar. I am prepared to lose a sub 1% amount for this optionality.