Attitude to Fixed Income in 2014

[Gittins Gal]

First, a confession. I'm a newbie investor.

That said, I'm finding the task of building a balanced portfolio somewhat bewildering and the more research I do, I find I have more and more unanswered questions.

Putting equities aside for a minute, I believe that fixed income funds are generally seen as a safe hedge against stock market turmoil and it's recommended that a substantial proportion of ones portfolio is made up of fixed income funds (the amount depending on your age, attitude to risk etc).

What's inneresting at the moment is that we seem to be at the end of the longest fixed income bull market for decades with the innernet abuzz with warnings of avoiding government and corporate bond like the plague. Let's face it, with innerest rates set to rise multiple times over the next couple of years and hence bond yields going up, only a fool would dabble in long term gilts.

The received wisdom appears to be that the way to go at the moment is to invest on strategic bond funds where the fund manager has the flexibility to invest in a range of fixed income assets accordingly.

Just wondering if any of you is rebalancing your portfolio at the moment and what is your approach to fixed income?

Back to equities though, a poster here kindly recommended some excellent funds (from a past performance point of view) but I can't help feeling I'm buying at the top of the market. I'm tempted to fill my more volatile portion of my basket with funds that deal with assets that are very much on the downward curve. Gold springs to mind. Also tempted on a bit of Japanese exposure. Gonna give Europe a wide berth completely with events in Ukraine and all that.

[alreadypacked]

Buy land, property etc.
Don't trust a piece of paper.

Friend, paid into a pension, when it came time to retire worth only half what he was expecting.

If he had bought a house, paid a mortgage with the money, house would be worth twice what he was expecting. In fact he would have paided the mortgage off quicker than the pension.

[Unix]

Buy land, property etc.
Don't trust a piece of paper.

Friend, paid into a pension, when it came time to retire worth only half what he was expecting.

If he had bought a house, paid a mortgage with the money, house would be worth twice what he was expecting. In fact he would have paided the mortgage off quicker than the pension.

WHS

Pay off your mortgage then use excess money to buy another property. You can then rent them for a perpetual income while still enjoying the rise is value.

[TheFaQQer]

Buy land, property etc.
Don't trust a piece of paper.

Friend, paid into a pension, when it came time to retire worth only half what he was expecting.

If he had bought a house, paid a mortgage with the money, house would be worth twice what he was expecting. In fact he would have paided the mortgage off quicker than the pension.

House prices can only go up. I read it in the Daily Mail.

[scooterscot]

WAPS

I don't invest as such, as I inherited land I'll never use but it's continued to increase in value over the years. It's the one thing they're not making unless someone figures out how to raise the sea floor.

Every time a piece of Dover falls into the sea my portfolio increases.

[RetSet]

Back to equities though, a poster here kindly recommended some excellent funds (from a past performance point of view) but I can't help feeling I'm buying at the top of the market.

Looking at annual cycles - “Sell in May and go away. Stay away till St. Leger’s Day”

What I have done in the past is liquidate some of my 'toppier' holdings in May then bought back during the volatile 'Stockmarket Summer Sales' period.

So, if it's equities you are after (or want to include in your portfolio), start looking in a month or two...

[doodab]

If he had bought a house, paid a mortgage with the money, house would be worth twice what he was expecting. In fact he would have paided the mortgage off quicker than the pension.

If he'd bought a house in London or the SE. In the rest of the country the picture is a little more varied.

Back in the late 80s my parents bought a house. When they came to sell it (admittedly in a hurry as the bank was going to repossess it) it was worth about 20% less than they paid.



They've lost about 40% in the last four years on a rural plot of land they bought with a view to building a new house as well. Luckily it's still worth more than the outstanding mortgage. Quite a few people haven't been so lucky.

BBC News - Negative equity afflicts 'half a million households'

BTL is different as you have the rental yield and leverage to consider, as long as you can avoid losing money on the property itself it's a reasonable investment. Again, quite a few BTL landlords outside the SE have been stung by price falls though, it's primarily the ridiculously low interest rates and high rents that keeps it attractive. Both of these factors will regress to the mean in time.

The primary reasons for crap performance from pensions are excessive charges and bad choice of investments. My stake holder pension has low charges and as I stuck with broad based index tracking funds rather than chancing my arm with a stock picker it's worth about 3x what I've paid in.

[tomtomagain]

First of all a disclaimer: Never believe, trust or follow anyone else's financial advice without doing your own research. And that includes my advice.

I think that the Vanguard Lifestrategy fund is an excellent choice.
(Vanguard LifeStrategy funds turn passive investing catatonic)

It gives you instant global diversification in equities and bonds and automatic re-balancing to keep you within the limits you have decided are right for you.

[BigRed]

I'd rather do my own gambling investing. I go for a diversified portfolio of 15-20 stocks mainly with an eye on dividends. My good performers in terms of share price this year are Royal Dutch Shell, Weir, Unilever, United Utilities, and Micron Technology. My worst are HSBC and ITE, which dropped 30% two days after I bought it (Ukraine crisis). HSBC is down 12% but pays good dividends and from experience working for them are pennypinching b*rards who avoided most of the banking crash despite having bought an American high risk mortgage lender (Household).

I bought Micron because I believe it will be difficult to lose money making computer memory with the current move to SSDs and increased memory in everything. I bought Weir because I had a job interview with them and liked the way their IT was set up and where it was going, I believe IT can be the differentiator between successful companies and also rans.

[milanbenes]

Buy land, property etc.
Don't trust a piece of paper.

Friend, paid into a pension, when it came time to retire worth only half what he was expecting.

If he had bought a house, paid a mortgage with the money, house would be worth twice what he was expecting. In fact he would have paided the mortgage off quicker than the pension.

+ 1

Milan.