Has your financial adviser reviewed your fixed income allocation yet? If they haven’t, it’s time to raise the topic (and maybe reconsider the fees you’re paying).
Bond funds became more popular during this year’s Isa season. UK investors added significantly to their holdings in March, and wealth managers continue to recommend them.
“It’s not a crime not to enjoy the ups and downs of equity markets,” says Nick Gait, investment director at Tideway Wealth. “Some investors just find it hard to deal with. Now we have real returns again from fixed-income funds, ahead of inflation after fees, and without the rollercoaster ride of equities.”
Granted, you can still get good income via cash savings — the top rate on a one-year fixed-rate savings bond is 5.21 per cent at Habib Bank Zurich. You could also buy the “risk-free rate” by investing in gilts and get more than 4 per cent.
But if you invest in corporate bonds, which are taking a step up the risk ladder, you can get higher income, with more potential for capital gains too. Even investment grade corporate bonds should yield more than gilts, because companies can and do go bust and management teams can do silly things. Some investors pairing income strategies with estate planning also explore how offshore bonds can support inheritance tax planning for UK investors as part of their wider portfolio structure.
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