Re: pooled investments?

What's your view about direct investment into shares? You're obviously keen to help the banks make money, but would you do your own fund management?

Rob Graham

Why would you suffer short term losses if you hold gilts?

If you hold to maturity you will get the par value back.

Regards, Zen

wrote

Duh - if gilt prices fall?!!

Eg if long-term interest rates rise, then a gilt with a lower coupon may look poor value - so it's price will drop in the market to compensate.

wrote

Exactly! Perhaps you missed the "key point" in Jonathan's sentence :- "short term" (you may get losses if sell in "short term"). If you hold for the "long-term" instead (ie to maturity), then you'll get a return fixed at the outset.

We are all agreed!

True

But the interest you receive should make up for it. Of course a lot of people don't realise that the interest can represent part return of capital.

"Jonathan Bryce" wrote

Are the Inland Revenue one of those "people" that realise this or not?

Eg would they agree you don't need to pay income tax on interest received just before redemption, when you know that the redemption will be at a loss (hence class the interest as capital return, still "at a loss" hence no tax to be paid) ?

In message , Jonathan Bryce writes

Thats true, if you measure by 'total return'. But many people dont realise that a redemption yield lower than running yield = capital loss.

If you want to hold on to the money for as long as possible, you will go for a low coupon bond (eg if it is a long term project where all the money comes in at the end)

"Jonathan Bryce" wrote

Ack - sorry - I'm gonna have to learn to explain myself a bit better!!

I mean, *given that* you receive A on date d1/m1/yyy1, B on date d2/m2/yyy2, C on date d3/m3/yyy3 etc etc - what does it matter what part of each payment is "interest" or "capital"? Except for calculating tax, of course, as indicated earlier.