I have a diversified equity portfolio (isa unit trusts), I have tracked it using best invest website ... and it recommends I now invest in hi yield / quality bonds ... (eg new star sterling) does this seem a good time to diversify into such bonds? (I have some cash reserve held within an ISA I could transfer... other outside in ING account...) Andrew
With interest rates likely to rise still further, no, not yet. Fixed interest securities are best when interest rates are falling.
High yield equities have done well since the dot-com bubble burst. If you don't have any equity income funds, you could switch into them from so-called growth funds, which have done anything but grow.
"Terry Harper" wrote
Why do you say that? If BoE increased rates much more, wouldn't they risk the inflation index falling below their required range??
Thanks ... just so I know the type of High yield equities you mean could you give and example unit trust?
thanks Andrew
Invesco Perpetual High Income is one of the best.
Rob Graham
Newton Higher Income is a good performer.
It all depends on how much money the Government needs to borrow, or to print. It also depends on the housing market, despite the inflation rate rule.
You may have noticed that most of the pundits predict at least two more rises before it starts to fall again.
Whilst looking at Trustnet the other day I was surprised to see that the Invesco & Newton High Income funds yield only slightly more than the market.
Daytona
Are they acting in their best interest or in yours ?
How much will you lose in bid-offer spreads (aka initial charges) ?
Daytona
Yes, they are really best for 'total return' rather than for taking income.
I think that it is a result of the higher-yielding shares growing faster than the lower yielding ones. Newton Higher Income is about
3.92% at the current price. It's stable mate, Newton Income, once a high-yielder, now yields a mere 1.52% having changed its spots.
That's what I assumed, but I'd expect them to be churning the portfolio back to high yield, to fulfill the fund objectives. Is this just a temporary situation or are these normal yields ?
Daytona
There has been some discussion recently on the Motley Fool High Yield Portfolio on how best to "tinker" as shares change in value and yield. One of the criteria that Newton HI has, for example, is to increase distributions in line with or ahead of growth in the RPI. It's the shares which do that which have the capital growth as well, so there is a limit as to how far you do (or even can) churn the portfolio.
Reversion to the norm is another way of putting it, if you do nothing.
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