Okay, it's not a bond! However, I guess a lot of you have these in the safe part of your portfolio?
Anyway the question is, should I renew a five year bond that will mature next month?
The plus points are that's it underwritten by the government, tax free, hedges against inflation and is no
Against this RPI this month is .6% and a pitiful additional .5% is added after maturity. So in short if the
RPI remains at this level for the next year, If I renew, for every £1000 invested I will receive just 1.1% or £11.00.
Of course this puts into context why some people may think that buying a junk bond for ten years at 4.4%,
or 6.5% for seven years is a good idea.
Will inflation finally rear it's ugly head; at least in my life time? The trouble is, if it does, further manipulation of how inflation is calculated may be used by central bankers to keep government borrowing artificially low.
So at the moment I plan to reduce my savings certificates and put the cash under the bed! In the meantime
I will research for a product that gives capital appreciation, not income, and that is moderately safe to enable me to live off my savings a little bit longer.