Stocks and Bonds


For the average investor they are best off buying a globally diversified stocks ETF for their main risk asset.
FTSE Developed World or FTSE All World.

What is the equivalent for Bonds. If in UK should you buy a global Bond ETF or a UK Government Bond/Gilt?

Is it okay just to hold cash in a bank savings account instead as your minimal risk asset?

Thank you.

On your first statement, I think this this is a complicated question, and really depends on your objectives, life stage, whether you are accumulating or decumulating, risk appetite, expected behavioural response to downturns. This podcast has a really helpful discussion:

On your second question, I think it all boils down to how much you trust the UK government (relative to to the other governments). Going for a gilt fund (or individual gilts) is going to be the cheapest option. But leaves you exposed if future leaders have policies like Liz Truss that send shockwaves through the market. A currency hedged G7 government bond fund will protect you against UK specific risks somewhat. But these are rare and higher cost. An aggregate bond fund like VAGS will be cheaper and offer a higher return by including investment grade corporate bonds. But it will come at the cost of lower crash protection because of the correlation between corporate bonds and equities.

I personally favour directly holding individual short term gilts outside my ISA wrapper (due to capital gains tax exemption) and an aggregate bond fund like VAGS within the tax wrappers.


There is a lot of research supporting buying the market in stocks, hence the popularity of global stock funds. Some apply the same logic to bonds - buy a global bond fund weighted according to how the market weights different countries, bond types and duration (buy VAGS or AGBP for example).

There are some big price-agnostic buyers of bonds though (central banks) so prices can be artificially skewed. There was an expectation that bonds are low-risk, but those funds dropped about 20% in 2022 (they have 7y durations so are rate-sensitive). There is a view that bonds offset the risk in stocks, but the global bond funds have sizeable proportions in corporate bonds that tend to move with stocks.

So, it is not so clear-cut with bonds. As bicharo indicates, it depends what you are trying to achieve. It is important to know the risks for what you are buying.
Regarding leaving money in a bank account - there are low-risk funds giving 5%+ returns so I’d be inclined to look at the options.

Personally, I buy investment-grade, short-dated funds for my bond allocation; along with some individual bonds (covered by the FSCS). It is an easy choice while rates are attractive and the path for future rates is uncertain - and I’m primarily aiming for capital preservation, so look for certainty over potential.

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