Thanks Pete. Great update again, appreciated as ever!

@MeaningfulMoney

Жыл бұрын

Cheers Ian - glad it was helpful!

Always love your videos Pete... thanks for the calm, reasoned advice.

@MeaningfulMoney

Жыл бұрын

Glad it was helpful, Steve - thanks for watching!

I started buying 30 year gilts in May and didn't really know what they were. I've had quite the education over the last few weeks! Now everyone seems to be talking about them! Thank you Pete!

@MeaningfulMoney

Жыл бұрын

I can imagine, Esther.

Excellent explanation in layman's terms of bonds/gilts Pete. Always enjoy your videos and learn something from each one.

@MeaningfulMoney

Жыл бұрын

Cheers David - glad they’re helpful!

Thanks Pete, just what I needed to hear.

@MeaningfulMoney

Жыл бұрын

I’m glad, Tim. Thanks for watching! 👍🏻🙏🏻

Definitely noticed a drop in the old private pension. I wonder if they do have Gilts within the fund. I will have to take a look. Thanks Pete.

As always, Pete, great wisdom and valuable guidance. Thank you.

@MeaningfulMoney

Жыл бұрын

Thanks for your unerring support, David!

Yet another superb video, bringing simplicity and clarity to an apparently complex and murky situation. The thinking man's Martin Lewis!

@MeaningfulMoney

Жыл бұрын

Really appreciate that, John. Glad it was helpful!

Many thanks Pete - that was very useful to me on many levels.

@MeaningfulMoney

Жыл бұрын

I’m glad, John. Thanks for watching! 🙏🏻

Thanks for the video, would have liked a ‘should I buy gilts’ answer too.

Great topic, and, as always. a great presentation - thank you, Pete! One question: how do inflation linked gilts operate in this environment?

Thanks Pete, YOU ARE AWSOME👍

@MeaningfulMoney

Жыл бұрын

And you are very kind, Andrew. 👍🏻🙏🏻👊🏻

I think even more interesting question is: should you buy? And not these fluctuating bond funds that some dare to call 'fixed income' but actual GILT issued by the government. Would be great to have episode on how to make such purchase. Someone said income from Gilts is tax free too.

@henghistbluetooth7882

Жыл бұрын

So are they ‘Gilt-free’ :)…? I’ll get my coat….

@MeaningfulMoney

Жыл бұрын

Hahahaha!

@MeaningfulMoney

Жыл бұрын

You can’t currently buy Gilts at issue from the DMO, so you’re limited to the secondary market. You can do this on various platforms, or through a stockbroker..

@owensmith7530

Жыл бұрын

I agree, gilts are under valued at present so if anything it's a good time to buy more rather than sell them.

Top work Pete 👍🏻 As has been said many times of late, has this year's market conditions killed the 60/40 portfolio once and for all? Personally I think risk off as you move closer to retirement makes sense but in a much smaller way than happens in most funds today. There is a belief by many that when you retire your money is somehow locked away as it stands which is so untrue as it can go on to make a fortune in the following 30 years or so if managed correctly.

Hate the lifestyle portfolios, I always think that you should stay in equities as long as possible, I dont want 10% of my portfolio to be in bonds at 35 then 15% at 40 etc.. etc.. I need maximum growth 100% of the time up until about 5 years before retirement.

@MeaningfulMoney

Жыл бұрын

Exactly, Chilli. I hate Lifestyling too…

The UK makes buying a Gilt directly quite difficult unlike say the US where it is easier to buy a Treasury Bond. These are direct purchases not funds I'm referring to. Many articles covering buying a Gilt(s), hold for full duration and get coupon rate. Quite useful rates at the moment in some auctions. The DMO is not geared to retail investors.

@MeaningfulMoney

Жыл бұрын

You’re right, it’s impossible to buy at auction if you’re a retail investor. You can use Computershare and other platforms to buy on the market though…

Thanks for the info, where is the best place to buy gilt directly?

Great video, as always. I would like another video on bond investment in general, despite the current market. Barclays are offering a 1 & 2yr fixed bond savings at 3.90% & 4% respectively. As my current account is 0% interest, I'm looking for ways to work my money by using the laddering technique moving foward. Any future videos covering this topic would be much appreciated.

It's a toss up , if the governement gets it act together then possibly yields will drop back and gilt values will recover slightly. On the other hand if the chaos continues, and the jury is definitely still out on that, then yields could rise further and long-duration gilts or gilt funds would be better sold, which way do you want to bet ?

@dudleyjoseph9485

Жыл бұрын

Are gilt funds though not less susceptible because they are constantly buying new gilts into the fund with higher coupons so the damage is being limited to some extent?

Hi Pete. Great video and also very much liked your LTA videos recently. I am working with Demi but have a question for you. If gilts were/are considered a low risk item in ones pension portfolio then why did they drop in value so much? They do not seem to protect you in a volatile market. Any view? Are corporate bonds any safer?

I expect you will hit annual rebalancing (or whatever frequency) before this is over, which will likely mean buying more bonds if they remain a depressed % of portfolio. Hold on rebalancing? Or look at it as buying bonds on sale….

@MartinHopkinson

Жыл бұрын

I don't know whether you watch Chris Bourne but he did a great video recently which might answer your question. ("Am I wrong about Vanguard?") I'll definitely be re-balancing for no other reason than 'that's my long term plan', but Chris's video gave me a good reason to feel better about it. (This is not spam by the way!)

Always so eloquently explained! Thanks. Given the historical reasons for transitioning from equities to bonds (i.e. to buy annuities),in what situation would gilts not get hit just as hard as equities? As a novice investor, they seem just as, if not more volatile, than any index fund I'm seeing. Is it just the unique set of variables in play?

@MartynThomas1

Жыл бұрын

The volatility of Gilt funds is just absurd at the moment. One I previously held (LEGAL & GENERAL ALL STOCKS INDEX-LINKED GILT INDEX) lost 25% in 3 days (22-27 September) !

@fredatlas4396

Жыл бұрын

@@MartynThomas1 that's because UK index linked gilts in those funds are very long duration, so very sensitive to interest rate movements. If you look you will see the shorter term bond funds haven't gone down anywhere near as much

@MartynThomas1

Жыл бұрын

@@fredatlas4396 When thinking about Gilts it's easy to think "Safe". People rarely think "very sensitive to". In recent times they have been more volatile than BitCoin.

Hi Pete, What I don’t understand with gilts, is if I hold on to them regardless of what they are trading at, don’t I still get back the original amount I bought them for I.e. in your example, that would be £1000. The issue seems to be when they are sold for less than their face value but why would anyone do that? If I bought your £1000 of gilts for £800 because the price is down, don’t I still get the £1000 when they mature? Great videos as always, always measured advice and aiming to educate.

@jblue2435

Жыл бұрын

Excellent point that needs answering!

@edwardkenworthy7013

Жыл бұрын

Whilst yes in ten years' time you will still get the £1000 you paid back, £1000 in ten years will be worth a lot less than £1000 today, because of inflation. If inflation increases, then the future-£1000 will be worth even less. If the future-£1000 + all the remaining coupon payments is less than the today-£1000 you bought it for, then the bond is worth less than the £1000 you paid for it. (Plus, you're paying the opportunity cost of not having the money.) As an example, £1000 in 2002 is worth about £1620 in today's money. So just to break even your bond would have had to pay you £620 (in 2002 pounds) in coupon payments. That's just to stand still, but wouldn't you expect a profit for not having the money for 20 years? So really, you'd expect more than that for it to be worthwhile.

@MeaningfulMoney

Жыл бұрын

You’ve basically nailed it here, Edward. Holding Gilts to maturity is a calculation about the relative value of the income to the money tied up and, of course, the price you paid for the Gilt. This is what I mean when I say that fixed interest securities like Gilts are more about the income than the capital, though the capital is still a factor.

Thank you for explaining this. You need to be invited to one of the news channels.

@MeaningfulMoney

Жыл бұрын

I’m up for that if they’ll have me, Colin!

Just lost 46% of my pension fund or over £300000 over the past year no chance of retirement next year at this point. great video wish i had a crystal ball. Sad times ,then again its only money.

@MeaningfulMoney

Жыл бұрын

Find out WHY, Jonathan. What caused a drop like that?

@Pontsticilljohnny

Жыл бұрын

@@MeaningfulMoney this was Thier response to that question.. I can appreciate your concern regarding the decrease in your transfer value. The Scheme Actuary has recently provided us with the following wording regarding transfer values decreasing in recent months. Although the change in the transfer values members are seeing will depend on a number of factors including current and previous date of calculation and the members age and size of pension, the key driver behind the recent decrease in transfer values is the change in gilts yield over the recent months. Gilt yields have increased significantly over recent months and this has led to a decrease in transfer values. By way of a bit more background, the transfer value represents an estimate of the amount of money needed to be set aside to provide the benefit at retirement. If gilt yields increase, a higher level of return is expected in future, so less needs to be put aside now. (Please note that this is a theoretical situation that is required by transfer value legislation. In practice your pension is calculated using a formula that relates to your salary and service). The increase in gilt yields over the period is largely linked to recent market turmoil (the Ukraine crisis is a key driver but there are other market events). This decrease in transfer values has been offset to some extent by the increase in inflation expectations. Higher inflation expectations leads to a higher transfer value. However, overall the impact has been a fall in transfer values over recent months. We regret there is no guarantee a transfer value will consistently increase over time. They can fluctuate significantly in short periods of time where markets are facing uncertainty or volatility

@coderider3022

4 ай бұрын

What was the equity / bond split and did you know and understand this ?

Hi Pete, can you explain how gilts work when your pension provider buys them as part of your lifestylying plan , do they work like equities in this regard....i.e. you buy and sell at the current market value ? and if gilt prices are low is there an argument to carry on buying them as part of a pension strategy.

@edwardkenworthy7013

Жыл бұрын

> i.e. you buy and sell at the current market value ? Yes. There might be a spread, so you pay slightly more to buy and are paid slightly less when selling, the difference being the broker's profit. > and if gilt prices are low is there an argument to carry on buying them as part of a pension strategy. If the gilt prices, relative to all of the other assets in the pension, drop, then their percentage of the whole pension also drops, so more will be bought to bring the percentage back to the target. Conversely if the price goes up then they will sell to bring the percentage back down (unless everything else also goes up and the percentage stays the same).

@DKNW62

Жыл бұрын

@@edwardkenworthy7013 thanks edward great explanation..... sorry for my lack of understanding...but who gets the coupon thats paid out then ?? The pension or the pension company ??

@edwardkenworthy7013

Жыл бұрын

@@DKNW62 The pension.

On the morning of the non-budget, I switched my UK Gilts fund to a US Gilts fund, my judgement was that the way the UK was being managed was not low risk anymore. I may switch back in 12 months or so if government sanity/logic returns. I had been thinking about the switch beforehand, the non-budget was the last straw.

@MeaningfulMoney

Жыл бұрын

Pretty smart move in retrospect. Good luck to you 👍🏻

My biggest single concern at the moment is not that my current investments are down but that I have no spare cash to go on a buying spree at these massively reduced prices :(. What I wouldn’t give to have £20k in cash about now. Imagine - if prices return to normal in perhaps 2024 almost doubling your money in a year or so.

@pistopit7142

Жыл бұрын

But how can you know what market will do? Imagine your additional £20k gets 50% haircut along with the rest of your investments in 2024. We can speculate as much as we want but no one knows what will happen and you sound like you think it's buying the dip.

@henghistbluetooth7882

Жыл бұрын

Not at all - I think the prices will return to where they were - we just don’t know when. And of course with Gilts that’s guaranteed anyway as you approach the maturity date. If prices went down another 50% then that would be 25% of the original price - again a big dip but not as big as the first. And once prices returned you’d get the same return - it would just take longer. The only risk with Gilts is being forced to sell at a loss or the UK government going bankrupt before the end date. Whether you buy now or buy later - as long as you are buying before the maturity at a price below the maturity price you’re fine. It’s just how long that would take.

@Chills124

Жыл бұрын

@@henghistbluetooth7882 I think that takes away their core value though, the only reason anyone invests in GILTs or Bonds is because they are supposed to be exempt from stock market fluctuations. The second you have to apply the principal 'they are only bad if you sell' its basically the same as holding SP500 because if there is a market crash its usually recovered after 2+ years except the GILT returns 3% per year and SP500 returns on average 10+%. I know where I would be putting my money...

@pistopit7142

Жыл бұрын

@@henghistbluetooth7882 but where would you buy gilts from, the easy way? Last time I've checked they could not be bought on amazon. Gilt fund? - no thank you very much for the volotality without siginfican upside - stocks win here.

@henghistbluetooth7882

Жыл бұрын

@@Chills124 Absolutely - all of my investments are in US equities at the moment. And I'd be torn between investing in Gilts or equities specifically at the moment only because the incompetence of the UK government effectvely undervalues Gilts so much (in my opinion - and only at the moment). Long term I plan on keeping a 100% equity portfolio right up to and through retirement in about 17 years. Whether that will be 100% global or 50% global/50% US I havent decided yet.

HI Pete, I understand 'do nothing' would make sense for people invested in Gilts who aren't due to retire straight away, however what about those very close to retirement? My mother's pension is 100% in GILTs and she wants to retire ASAP however it's taken a 27% hit. I don't know what to advise her to do

@MartynThomas1

Жыл бұрын

My advice would be to take your mother to see a financial advisor. "100% Gilts" has the feel of someone who has tried to achieve a DIY super cautious portfolio. The trouble is that "Super Cautious" might not be the best thing for her and 100% Gilts might not be the best way to achieve that. I always thought Gilts would be "safe as houses" but in recent months they have been more like Bitcoin !!

@clairlybel

Жыл бұрын

@@MartynThomas1 thanks. I've been suggesting she see a financial advisor for about 7 years. She has always refused to go. I think this huge loss has made her realise that she needs to see somebody but she's wanting to look at that pension in isolation, she refuses to look at her other incomes&pensions, as a big picture, or review her outgoings, but wants me to advise her on if she can afford to retire. PS I don't think this was DIY, she opened in in 2009 but hasn't paid much attention to it and has left Halifax fund manager to manage it.

@MeaningfulMoney

Жыл бұрын

I’d look at annuity rates now. I’m some cases the rise in rates has offset or more the fund value. Video coming next week

@terrybrown3486

Жыл бұрын

@@MeaningfulMoney Plus she could buy a fixed term annuity and wait for gilts to build back up. Or just buy as much as she needs and leave the rest.

Pete the reason I don’t invest into bonds is not because of the lower return compared to shares. it’s just say for example I own a 10 year bond and I have £10000 in it and it pays 5% coupon every 1st of July. But what if the bond supplier lowers the yield to 0.5% every June, July and August so instead of getting £500 what I assumed I’d get we only get £50 and is that just the risk you have to take when investing in bonds? And we all know the FSCS will cover your funds up to £85000 but say for example i have over £85000 in a bond would the FSCS give you a little more if you had your money in a U.K. GILT

@malcolmsilkstone2100

Жыл бұрын

Kevin, if you buy a UK gilt at issuance, the coupon (yield) is guaranteed for the lifetime of the gilt. Say, the coupon is 5%, you'll get that interest per annum plus your capital back when the bond matures. If you buy the gilt in the secondary market, you may pay more, the same or less than the nominal value of the gilt, depending on how interest rates have moved since the bond was issued, but you'll be paid 5% on the value at issuance and not on what you paid for the bond in the secondary market.

@MeaningfulMoney

Жыл бұрын

Absolutely right, Malcolm. Kevin, I can’t really say it better than Malcom did - the bond issuer cannot change the interest in the bond once it is issued (though it can default).

@kevincowan2639

Жыл бұрын

@@malcolmsilkstone2100 is there any websites or apps you would suggest me to use to buy some government backed bonds? Also are these ‘green bonds’ we heard a lot about last year not to much this year backed by the U.K. government

@kevincowan2639

Жыл бұрын

@@malcolmsilkstone2100 I’ve always thought they aren’t proper bonds like they won’t have the same protection as a bond bought directly from HMRC. That’s how I always thought you buy bonds if you want HMRC protection.

@malcolmsilkstone2100

Жыл бұрын

@@kevincowan2639 Bonds come with various credit risks. In this regard, UK Gov bonds are regarded as virtually risk-free, the UK gov having never defaulted on its bonds. However, no investment is 100 % risk-free and there is no protection or compensation for investment losses. The FSCS does not cover this type of loss.

My pension fund had lifestyling in place. With a retirement date of 60 (next year). 15% down year on year. As I have another pension I decided to push back the date on this one to 74, leaving time for recovery over more than a decade. This autonatically switched from shares 30% bonds 45% cash 25% to shares 85%, bonds 15%. So I have taken a risk, against your "do nothing" advice. Seemed like the right course for me, as I don't need to draw on it for 15 years or so. Any thoughts?

@MartynThomas1

Жыл бұрын

IMO what you have done is an improvement but as MeaningfulMoney said in this video, the practice of Lifestyling (switching away from "risky" equities to "safer" bonds as you approach retirement) is a hangover from the days when retirement meant buying an annuity. In 15 years, when you reach 75 you may find your investment attitudes are the same as they are now, in which case would you really want to be just 30% in shares by then ? I recently switched one of my pensions out of a lifestyle fund and into a 100% equity fund. I'm now 55 and the fund was about to start switching to bonds.

@richardsmeeton8910

Жыл бұрын

My lifestyle fund has 20 months before chosen retirement date and despite being 60% in cash it’s been losing hundreds of pounds a week. The problem at our age for those of us in these low risk profiles is that the tapering of asset mixes will bake in these loss by automatically selling bonds and gilts as we get ever closer to the chosen date. I was going to switch into an equity based drawdown portfolio 6 months ago but was advised to sit tight. Sometimes doing nothing is the wrong thing.

@edwardkenworthy7013

Жыл бұрын

The "do nothing" advice is to avoid crystallising a loss and missing out when the asset recovers. One thing to be aware of with LifeStyling funds is they are typically more expensive than buying the individual component funds yourself. For example, Vanguard's Lifestrategy fund charges 0.22%, which isn't expensive until you compare it to say their S&P500 fund, one of the cheapest, at 0.07%.

@fredatlas4396

Жыл бұрын

@@MartynThomas1 So what will happen if you do actually want to buy an annuity at retirement. I think it may be possible now or very soon to get a 7% annuity at 65yrs old. If you are mostly in equities and the stock market crashes just before you want to retire, what will you do then. Say your whole portfolio goes down by 45% and you are just a few months away from retiring. And just because the stock markets recovered quite quickly from 2009, doesn't mean it will be the same next time around, it could take anything up to 12 yrs just to get back to where you were before the crash of we go into a protracted bear market. And if your pension fund was just about to sell some shares and go into bonds that might actually have been a good move because bonds are somewhat cheaper now and paying higher yields . I guess if you are planning on doing a drawdown then you might not want to be to much in bonds, but still have some bonds in your portfolio. And you could buy into a shorter term bond fund. You can get short term UK gilt index etfs, or Vanguard do a short term version of their global bond index fund which is very well diversified in the bond space. Warren Buffet said his money for his wife has instructions for it to be invested 90% in a cheap S&P 500 index fund and 10% in short term US treasuries. Notice short term treasuries.. Of course longer duration bonds do tend to produce better total returns over the long term, but with more volatility. And apparently we've been in a 30 year bull market for bonds, because interest rates have been coming down. But they are obviously going up now, but nobody really knows how far the interest rates will rise, or how long they will stay up etc. They could come back down again if we have a bad recession

@MartynThomas1

Жыл бұрын

@@fredatlas4396 "Say your whole portfolio goes down by 45% and you are just a few months away from retiring" - That is a rare and extreme scenario. Something like that happened in 2020, 2008, 2000, 1973 and in 1929 but not in the other 115 years since say 1900. If it is something you are genuinely worried about then you should make sure you have a well diversified, risk appropriate portfolio. If it's a situation you never planned for but find yourself in then you would have to make adjustments like, delay retirement and or live frugally. The 2000 crash went on for ~3 years, the 2020 crash was more like 3 months. Note Buffet's plans for his wife ... 90% Equities.

Hi Pete. Been following for a while. Don’t expect advice on KZread but if you can help then fine. Aged 53, caring for parent on Universal Credit, Carers Allowance. Defined Benefit DB with planned access at age 55. I am not interested in the annual pension as it equates to 500 per month after state pension clawback element. So transfer value was £240K last week. It’s now £187K this week. The tax free element was and is important to me. Without giving advice, what are your thoughts. Thanks.

@MeaningfulMoney

Жыл бұрын

My thoughts are that's VERY unfortunate, and I'm sorry about that. All I would say is that you should tread very carefully when considering a DB pension transfer. I can't advise here, as you've said.. The reason that the CETV has dropped so much is the sharp rise in Gilt Yields - it'll now cost you less to buy an equivalent income. Stay tuned for a couple of videos on annuities and drawdown coming up in the next couple of weeks...

@michaelwalker6266

Жыл бұрын

That may not sound a lot £500 per month but remember it will compound over the years ,Calculators on line you may be surprised at how it grows.

People who voluntarily bought long gilts at 1% and less needed their head checked. (I was quite shocked to see the collapse in the 2034 index linked. That I wouldn't have expected. £166 to £98 in six months. Incredible).

@MeaningfulMoney

Жыл бұрын

It’s a weird world right now…

buy gilts will be better performing than stocks the next few years

@MeaningfulMoney

Жыл бұрын

We’ll see…!

@crispyduck1706

Жыл бұрын

@@MeaningfulMoney I’ve gone 60 bonds in my pension - hope it’s the right decision

@edwardkenworthy7013

Жыл бұрын

I think they will go up more than usual, simply because they are currently down. But stocks are also currently down, and they always outperformed gilts.

@crispyduck1706

Жыл бұрын

@@edwardkenworthy7013 probably a combo of the two will start to work again - I’d go 60 / 40 in favour of bonds

@MartinHopkinson

Жыл бұрын

Chris Bourne’s last video backs you up to some extent on that prediction.

Cash is trash. Gilts will only devalue in the long term.

Sell gilts and buy gold? No... sell gold and buy gilts! ;)

@MeaningfulMoney

Жыл бұрын

You may be right!

@ColinMcNulty

Жыл бұрын

@@MeaningfulMoney Rebalanced my portfolio yesterday. Gilts down 30% so bought more gilts. Buy low, right? ;)

@ColinMcNulty

Жыл бұрын

​@@MeaningfulMoney Vanguard Gilt Index is up 20% from when I bought on 14th October. ;) New stock tip: Spotify, currently trading at an all time low, despite beating analysts forecasts and increasing membership by 20% in the last 12 months.