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Bonds, prefs, liquidity, yield...

Gilts, bonds, and interest-bearing shares
evan8
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Bonds, prefs, liquidity, yield...

#395305

Postby evan8 » March 13th, 2021, 8:13 pm

Hi

So I participated resulting in great personal benefit in the motley fool readers 2009 preference share heist.

Then I lost most of it in the oil market....

Now, over ten years later, I’m looking to place my entire portfolio in securities I don’t have to worry about (too much). I’m looking at retiring in 10 years, so I need to build up some more capital and find an income stream thereafter..

Looking at my old favourites, av, llpc, nwbd - they are certainly a lot more expensive now and there has been some talk of calls etc. on the first two. At this point I could not stomach never mind recover from a par call.

So I turned my attention to bonds, and never having traded any I wonder if anyone can help who has experience of the liquidity of ftse isses, abynof the familiar names for example. There are some maturing in 10 years and others in 40, how difficult is it to sell these if I change my strategy? Is getting stuck with something likely? Can you just lower your ask to get them sold?

Would a bond fund or pref fund be a better bet? Any suggestions?

Does anyone have any suggestions for bonds or prefs that they think represent good value just now?

Could anyone share their diversification strategies, how many/percentage do you feel comfortable running with?

I am hoping to end up with a yield in the 3.5-6% range. I appreciate this is higher than many are paying just now..

Newroad
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Re: Bonds, prefs, liquidity, yield...

#395312

Postby Newroad » March 13th, 2021, 9:23 pm

Hi Evan8.

If your last requirement is the over-riding one (i.e. 3.5% TO 6.0% yield) then perhaps some combination of investment trusts from the

DEBT - LOANS & BONDS sector, e.g

    CMHY 5.26%
    HDIV 5.12%
    IPE 6.95%

and the

GLOBAL EQUITY INCOME sector, e.g.

    SAIN 2.64%
    JGGI 3.22%

The bond to equity ratio would be down to your taste - could be 100% bond - and if you wanted to go UK rather than global (the latter being my preference) that would give a different choice too (certainly on the equity side). Maybe the old 100 or whatever minus your age might work. As always, nothing is risk free and many are concerned about rising inflation - you'd have to form a view on that - but I would suggest that some equity holding, rather than just bonds, would make sense.

I own all three of the DEBT trusts above (CMHY and IPE are probably going to merge soon). All trusts I have noted are ***** or **** Morningstar rated - by considering also *** rated, you'll get a broader choice. Finally, I have previously looked at creating a "bond ladder" with UK Gilts, for the future, and in short, I think it's just too difficult to execute for private investors.

Regards, Newroad

evan8
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Re: Bonds, prefs, liquidity, yield...

#395340

Postby evan8 » March 13th, 2021, 11:14 pm

Newroad

Thank you very much.

Could you add anything regards selling any of the securities you mention. My only experience in this area was prefs which were always very liquid.

Are quotes always available, could you sell say 10k worth easily?

Thanks again.

Newroad
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Re: Bonds, prefs, liquidity, yield...

#395346

Postby Newroad » March 13th, 2021, 11:53 pm

Hi Evan8.

As we're in the accumulation phase, sales are rare and modest (typically only as part of rebalancing to maintain a certain portfolio composition). The one largish one I can recall (in my wife's SIPP for IPE) was fine.

We've also bought some chunky amounts of CMHY, HDIV and IPE from time to time - certainly well into the 5 figures - and once again fine.

Quotes are not as tight as for, say, very liquid ETF's like VWRL or VAGP which we also hold, but reasonable. I can't recall a quote not being available during normal trading conditions - but I wasn't trying to buy or sell during the crash Q1 last year.

Regards, Newroad

evan8
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Re: Bonds, prefs, liquidity, yield...

#395479

Postby evan8 » March 14th, 2021, 3:47 pm

Thanks


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