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Perhaps someone could explain why you would buy into one of these bond funds, which over the last two years have lost between 10 and 40% approximately, and are therefore NOT a hedge against equities, when you could have left your money split between low volatile stocks and cash and you would probably be flat lining over the same period.
Another great video Ramin, I like VAGP for the bond portion of my portfolio (Vanguard SIPP), OCF/ER of just 0.10% is great (+ having to reinvest isn't too much of a hassle) - GBP Hedged is also a nice plus!
There seem to be precious few UK Gilt fund options particularly if one is interested in medium duration. JustETF shows only 5 ilts funds? - 1 short term, 1 long, the rest full spectrum of durations but leaning towards long. Found a lot more non-ET funds on Morningstar, but they all seem to track the same benchmark and therefore have similar duration around 11 years. There are also some short (0-5) funds. Seems very little compared to US Treasury options. Am I missing a trick in how to find these?
Ramin - what’s the point of including corporate bonds if they have a higher correlation with equity? It seems like you’re just reducing the utility of the hedge in that case.
Great video, thanks. I'm confident investing into a passive globally diversified equity fund having read Tim Hales book on smarter investing. I've actually gone into vanguards global developed markets ETF VEVE. I now just need to put my percentage into bonds. I was going to copy vanguards own selection of bonds in their life strategy products. However, I appreciate those funds have a home bias. So I guess I'm asking, do I need to have a different split between global and UK bonds to Vanguards in their life strategy?
Thank you, I am just about to make my first index fund purchase via vanguard. I intend to invest long term and just leave the funds ‘locked away’ for at least 5 years forgetting about it. I am just getting slightly stuck on how I balance my percentage portfolio between equity vs bonds. Low risk is good for me. Any tips or related videos you can recommend?
I’ll show you make case and I’d love your opinion I’m European, I can either choose to invest in $VGEA an etf of only govt euro bonds, no currency risks, no currency hedge costs Or In a global aggregate one like $EUNA (ishares global aggregate bonds eur hedged) with currency hedging costs Both are ACC Both scenarios I’m avoiding currency risk, but the first one has lower costs (due to no hedging required) but less diversification The second one has higher diversification but greater costs (I can backtrack Their performance on just etf but only back to 2017 and their performance has been practically identical)
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Looking forward to these videos every week. Great content as always. Just one thing I'm struggling to understand is the point of USD hedged funds from the UK. Wouldn't it make more sense to have a GBP hedged fund if you are in the UK and a USD hedged one if you are in the US?
Hello :) i was thinking about adding Gold and Bonds to my portfolio. Right now i have 100% stocks, but most of it through Funds. I also bought some high yield bonds the other day. Do you think it will be to defensive to have Stocks and then high yield bonds, low income bonds and gold at the same time? Would it be better to have stocks, high yield and safe bonds, taking away the gold?
Good Afternoon , I really appreciate your content , would you consider make an analysis about Funds and Trusts that have out performed SNP 500 over 20 year period . Example Scottish Mortgage Investment Trust has out performed SNP 500 for last 20/years
I've looked at the performance of some of these bond funds. They absolutely suck! One of them lost about 30 percent in just a year . Beats me why any UK investor wouldn't put his money in NS&I for a guaranteed(!) 6.2 percent
Lovely. Even more lovely would be to have some info on the yields of these etfs. For example I believe short term bonds reached now similar yields to long term bonds
Hi @Kris Krispy you can! But if you have money in a low-tax account (like an ISA or SIPP in the UK) you can't take the money out and put it back in without losing the tax advantages so you have to park the money in something in that account. Thanks, Ramin.
@@Pensioncraft ok that makes sense. I have a question, when I buy BND right now, it says it gives a 3% yield, but later down the line if the price of BND drops significantly, does the 3% yield change? Or does the yield change regardless of the price you bought at? (sorry I think I am confusing bond yield with dividend stock yield where the dividend does not change even if the price of the stock drops)
Is there a reason you didn’t mention the Vanguard versions of the global aggregate bond funds? E.g. VAGU (USD) or VAGF (EUR). Aren’t they mostly the same thing as the iShares one?
Market risk, if you own a Gilt/treasury in your own name you are entitled to the coupon every year until the bond matures no matter what the market does, this is the same for corporate bonds, but the bond you buy from a business may be worthless if it goes bust or skips debt payments. Ownership also means you can't get a message saying that your chosen fund is being closed/transferred to another. Short duration bonds recently have been pointless, in the UK bank fixed interest savings bonds have beaten short duration bonds without the market risk.
@@8G00SE8 not sure what this has to do with my question which is about owning bond etfs in your own countrys bonds (I.e Australia only bond etf) as opposed to owning global aggregate etfs, not owning bonds directly.
@@Ryan-wf7sh From my understanding, a government's bonds will generally be much less correlated to that country's stock market because people tend to flee volatile stocks to safe government instruments in downturns. So if you own only Australian stocks, Australian government fixed income would be a great hedge, same with other countries and their respective stocks to government bonds. Tougher to do with international stocks, but at least your domestic portion should be covered.
@@SKITTLELA thanks mate, that makes sense. Cause I was wondering why someone would choose an international bond fund that is either exposed to currency risk or they have to pay more fees to hedge when they can invest in a domestic bond fund which has no currency risk.
Good Morning Ramin - In the current economic climate bonds do not appear to be expected to make a positive return in the foreseeable future. Would it not be preferable to provide some portfolio protection by holding an element of cash or investing in a Cash Fund ?
The point is they're a hedge against equities. You don't want to hold something that is highly correlated to the stock markets if you need that money relatively soon. The main selling point of bonds are their low risk in an overall portfolio--especially Treasury bonds.
Regardless of the markets ups and down its still a win win working with my financial Advisory Anna Hamilton currently Coo and Cmo . Anna buys stocks like someone who started yesterday with no regard for Macro concerns like inflation, and interest rates. That's a rookie mistake, I started my portfolio with precisely 84k grand in stocks last year and currently over 1.3 million in my portfolio , never had major loses all of that covered by her insurance policies .I still believe that the secret to financial stability is having the right investment ideas to enable you earn more money, I don't know who agrees with me but either way I recommend stocks because stock market is still one of the most potential places to invest your money
Hi Ramin As you talk about Funds in this latest video of yours which I have yet to watch and will do so later today, I wondered if you could explain to me why the Vanguard S&P 500 does not drop much in value yet I am convinced that many many of the 500 companies in it have been hit very hard in the past 2 months so with their stock prices dropping anything from 20 to 80%. The Vanguard price topped around £68 a few months ago but has only fallen to the present price of £61, I do not understand why so little. Before the pandemic in late February early March it's price was around £50 which at the time was very frothy and could have been considered a bubble because of the bull rally from 2010 which must have included a lot of fomo then the Trump years which elevated it to its dizzy heights. Jack Bogle and he should know said the S&P 500 gave an historic return of around 8 to 10% yet in the time since March 2020 to its high point climbed around 80%. Is it possible to be so kind as to explain this to me, maybe I am a bit dumb or maybe it is as I suspect still highly overvalued, even Tesla and the big tech stocks have not escaped the current bear market. I would say that a fair realistic value of the S&P500 would be somewhere around the £40 to £45 mark. Thanks. Andrew
Hi Andrew the index is market capitalisation weighted so the huge mega-caps dominate as drivers of the index (Apple, Microsoft, Alphabet etc.). They've held up better than the majority of stocks in the index hence the relatively small movements for the overall index hiding the carnage for some smaller stocks. Thanks, Ramin.
Thanks Ramin for your much appreciated explanation which I had thought may be the case for the S&P holding up. Nonetheless even the big companies you mention have been hit pretty hard as well. If the S&P 500 hardly ever drops much (especially now with everything bad happening at the moment) because of the large growth companies holding it up then surely everyone should just pile into the fund rather than run around like headless chickens looking for the next best thing? Regards Andrew.
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Capital at risk. InvestEngine (UK) Limited is Authorised and Regulated by the Financial Conduct Authority (FRN: 801128)
Perhaps someone could explain why you would buy into one of these bond funds, which over the last two years have lost between 10 and 40% approximately, and are therefore NOT a hedge against equities, when you could have left your money split between low volatile stocks and cash and you would probably be flat lining over the same period.
The best financial channel on youtube!
Thanks so much
Hi Ramin, I think there's a little mistake. Vanguard global short term fund is hedged as far as I understand. You're still a legend!
Indeed, but later in the wrap up recommendations, he did say it was currency hedged.
14:29 the image shows its hedged income in the title of the fund but the you say its not hedged I'm confused?
Another great video Ramin,
I like VAGP for the bond portion of my portfolio (Vanguard SIPP), OCF/ER of just 0.10% is great (+ having to reinvest isn't too much of a hassle) - GBP Hedged is also a nice plus!
Thanks for sharing!
....or VAGS as the accumulation version meaning the dividends are automatically reinvested.
14:42 Here you've confused me a bit because that Vanguard fund says its hedged.
It is hedged - he confirms this later (must have been a voice-over mistake)
There seem to be precious few UK Gilt fund options particularly if one is interested in medium duration. JustETF shows only 5 ilts funds? - 1 short term, 1 long, the rest full spectrum of durations but leaning towards long. Found a lot more non-ET funds on Morningstar, but they all seem to track the same benchmark and therefore have similar duration around 11 years. There are also some short (0-5) funds. Seems very little compared to US Treasury options. Am I missing a trick in how to find these?
I like this vid. Good insight.
Thanks so much
A very good video. Keep making content like this please.
Thank you, I will @Andrew
For US etf, there is also BNDW/Vanguard Total World Bond which is a fund of fund etf that invest in both BND and BNDX in a single etf.
Thank you Ramon and team for another excellent primer 👍🏾
Our pleasure!
Ramin - what’s the point of including corporate bonds if they have a higher correlation with equity? It seems like you’re just reducing the utility of the hedge in that case.
Higher returns, (bonds isn’t always for hedging) but yeah for those using bonds as a hedge then gov is better
Apart from the new ishares ibonds most bond etfs seem to have little to no practical value from what I can see.
Great video, thanks. I'm confident investing into a passive globally diversified equity fund having read Tim Hales book on smarter investing. I've actually gone into vanguards global developed markets ETF VEVE. I now just need to put my percentage into bonds. I was going to copy vanguards own selection of bonds in their life strategy products. However, I appreciate those funds have a home bias. So I guess I'm asking, do I need to have a different split between global and UK bonds to Vanguards in their life strategy?
I personally use VEVE + VAGP (for the bond portion - 0.10% OCF/ER + hedged in GBP)
Can we also have a discussion on Mixing Active and Passing Funds instead of Choosing one over the other
Thank you, I am just about to make my first index fund purchase via vanguard. I intend to invest long term and just leave the funds ‘locked away’ for at least 5 years forgetting about it. I am just getting slightly stuck on how I balance my percentage portfolio between equity vs bonds. Low risk is good for me. Any tips or related videos you can recommend?
I’ll show you make case and I’d love your opinion
I’m European, I can either choose to invest in $VGEA an etf of only govt euro bonds, no currency risks, no currency hedge costs
Or
In a global aggregate one like $EUNA (ishares global aggregate bonds eur hedged) with currency hedging costs
Both are ACC
Both scenarios I’m avoiding currency risk, but the first one has lower costs (due to no hedging required) but less diversification
The second one has higher diversification but greater costs
(I can backtrack Their performance on just etf but only back to 2017 and their performance has been practically identical)
Looking forward to these videos every week. Great content as always. Just one thing I'm struggling to understand is the point of USD hedged funds from the UK. Wouldn't it make more sense to have a GBP hedged fund if you are in the UK and a USD hedged one if you are in the US?
I'm not sure if that was an error? The equivalent GBP hedged is AGBP - iShares Core Gl Aggregate Bd UCITS ETF GBP Hgd
What do you think about BLV?
Hello :) i was thinking about adding Gold and Bonds to my portfolio. Right now i have 100% stocks, but most of it through Funds. I also bought some high yield bonds the other day. Do you think it will be to defensive to have Stocks and then high yield bonds, low income bonds and gold at the same time? Would it be better to have stocks, high yield and safe bonds, taking away the gold?
I prefer gold over bonds
Good Afternoon , I really appreciate your content , would you consider make an analysis about Funds and Trusts that have out performed SNP 500 over 20 year period . Example Scottish Mortgage Investment Trust has out performed SNP 500 for last 20/years
Fzrox, fzilx avoid bonds until near retirement start glide path 10-5 years.
I've looked at the performance of some of these bond funds. They absolutely suck!
One of them lost about 30 percent in just a year
.
Beats me why any UK investor wouldn't put his money in NS&I for a guaranteed(!) 6.2 percent
Lovely. Even more lovely would be to have some info on the yields of these etfs. For example I believe short term bonds reached now similar yields to long term bonds
Interest rate *goes up*
Me: We meet again, Mr. Bond...
An excellent video. Thank you.
Glad it was helpful!
Great video as usual. What do you think about Vanguard’s Global Bond Index Fund - Hedged Accumulation?
I might have watched section 4: hedging 25 times
If bonds are like cash, then why not hold cash in high interest savings account???
Hi @Kris Krispy you can! But if you have money in a low-tax account (like an ISA or SIPP in the UK) you can't take the money out and put it back in without losing the tax advantages so you have to park the money in something in that account. Thanks, Ramin.
@@Pensioncraft ok that makes sense. I have a question, when I buy BND right now, it says it gives a 3% yield, but later down the line if the price of BND drops significantly, does the 3% yield change? Or does the yield change regardless of the price you bought at? (sorry I think I am confusing bond yield with dividend stock yield where the dividend does not change even if the price of the stock drops)
Great topic!
Thanks
Is there a reason you didn’t mention the Vanguard versions of the global aggregate bond funds? E.g. VAGU (USD) or VAGF (EUR). Aren’t they mostly the same thing as the iShares one?
Return Free Risk
What are the downsides of just investing a bond etf that holds only your own countries bonds?
Market risk, if you own a Gilt/treasury in your own name you are entitled to the coupon every year until the bond matures no matter what the market does, this is the same for corporate bonds, but the bond you buy from a business may be worthless if it goes bust or skips debt payments. Ownership also means you can't get a message saying that your chosen fund is being closed/transferred to another. Short duration bonds recently have been pointless, in the UK bank fixed interest savings bonds have beaten short duration bonds without the market risk.
@@8G00SE8 not sure what this has to do with my question which is about owning bond etfs in your own countrys bonds (I.e Australia only bond etf) as opposed to owning global aggregate etfs, not owning bonds directly.
@@Ryan-wf7sh From my understanding, a government's bonds will generally be much less correlated to that country's stock market because people tend to flee volatile stocks to safe government instruments in downturns. So if you own only Australian stocks, Australian government fixed income would be a great hedge, same with other countries and their respective stocks to government bonds. Tougher to do with international stocks, but at least your domestic portion should be covered.
@@SKITTLELA thanks mate, that makes sense. Cause I was wondering why someone would choose an international bond fund that is either exposed to currency risk or they have to pay more fees to hedge when they can invest in a domestic bond fund which has no currency risk.
@@Ryan-wf7sh Lots of info and data out there. Investing is simultaneously very simple and (at least can be) very complex. Good luck!
Good Morning Ramin - In the current economic climate bonds do not appear to be expected to make a positive return in the foreseeable future. Would it not be preferable to provide some portfolio protection by holding an element of cash or investing in a Cash Fund ?
how to buy russian index? its up like 30% on a single day
Van Eck RSX
Please tell us you didn't buy that!
It seems that bonds are places to lose money and that some are losers and some are loserers.
🙂
Bonds is one of the worst things you can hold now. I'd much rather own gold or Coca-Cola.
The point is they're a hedge against equities. You don't want to hold something that is highly correlated to the stock markets if you need that money relatively soon. The main selling point of bonds are their low risk in an overall portfolio--especially Treasury bonds.
@@SKITTLELA hence my statement.
Regardless of the markets ups and down its still a win win working with my financial Advisory Anna Hamilton currently Coo and Cmo . Anna buys stocks like someone who started yesterday with no regard for Macro concerns like inflation, and interest rates. That's a rookie mistake, I started my portfolio with precisely 84k grand in stocks last year and currently over 1.3 million in my portfolio , never had major loses all of that covered by her insurance policies .I still believe that the secret to financial stability is having the right investment ideas to enable you earn more money, I don't know who agrees with me but either way I recommend stocks because stock market is still one of the most potential places to invest your money
Hi Ramin
As you talk about Funds in this latest video of yours which I have yet to watch and will do so later today, I wondered if you could explain to me why the Vanguard S&P 500 does not drop much in value yet I am convinced that many many of the 500 companies in it have been hit very hard in the past 2 months so with their stock prices dropping anything from 20 to 80%.
The Vanguard price topped around £68 a few months ago but has only fallen to the present price of £61, I do not understand why so little.
Before the pandemic in late February early March it's price was around £50 which at the time was very frothy and could have been considered a bubble because of the bull rally from 2010 which must have included a lot of fomo then the Trump years which elevated it to its dizzy heights.
Jack Bogle and he should know said the S&P 500 gave an historic return of around 8 to 10% yet in the time since March 2020 to its high point climbed around 80%.
Is it possible to be so kind as to explain this to me, maybe I am a bit dumb or maybe it is as I suspect still highly overvalued, even Tesla and the big tech stocks have not escaped the current bear market.
I would say that a fair realistic value of the S&P500 would be somewhere around the £40 to £45 mark.
Thanks.
Andrew
Hi Andrew the index is market capitalisation weighted so the huge mega-caps dominate as drivers of the index (Apple, Microsoft, Alphabet etc.). They've held up better than the majority of stocks in the index hence the relatively small movements for the overall index hiding the carnage for some smaller stocks. Thanks, Ramin.
Thanks Ramin for your much appreciated explanation which I had thought may be the case for the S&P holding up.
Nonetheless even the big companies you mention have been hit pretty hard as well.
If the S&P 500 hardly ever drops much (especially now with everything bad happening at the moment) because of the large growth companies holding it up then surely everyone should just pile into the fund rather than run around like headless chickens looking for the next best thing? Regards Andrew.