dealtn wrote:mc2fool wrote:As GeoffF100 correctly stated, I was talking about "if held to maturity". Sorry if you think that wasn't clear.
![Rolling Eyes :roll:](./images/smilies/icon_rolleyes.gif)
Well I am sorry if I am not making myself clear but even IF held to maturity there are both a lot of risks on that timeline, and even on arrival you might not get what you expect. If that risk can't be seen perhaps consider what could happen IF
The definition of inflation changes over that 50 years.
The rules on CGT change
A wealth tax is introduced
Redemption rules of the issuer change limiting the amount that can be repaid.
Bear in mind the issuer is the primary legislator in the country, and will remain so over the life of the investment
...
That's before considering those risks you seem to want to ignore during the holding period which are even greater.
The definition of inflation will change (in 2030) and that's already known and was so from issuance, and if it changes again it is very unlikely to affect any gilt already in issue (as it didn't with the 2030 change when it was announced). Similarly the chances of the government simply changing the redemption amount is pretty near zero. The whole point of gilts is that they are a contract that offers a totally known quantity to maturity.
Taxes are exogenous changes that don't affect the security itself. If you want you could add to your list the "risk" that the investor goes from being a BRT to an HRT thereby reducing their net return from the coupon, but I don't consider that a risk
of the gilt.
There are no risks during the holding period
if you hold to maturity. If you do that you can
totally ignore the vagaries of the market during its life and will still get exactly what you expected on the day you bought it.
I fully agree that they are not low risk if you don't hold to maturity, but that's not what I'm referring to.