Lose your Money
I have a brilliant way of losing your capital.
Am I right in saying that if you purchase a Gilt Edged stock currently priced at £125 with a maturity date of 2015 then in 2015 the wonderful government will give you £100 guaranteed, no quibble!
Now I know that you will have received your six monthly income payment but for all the income you receive you will be guaranteed to lose £25 of your capital.
You will also have been taxed on your income at the appropriate rate of interest. You cannot of course offset your capital loss against any gains because gilts are exempt from any CGT?
So this is a ticking time bomb because too many inexperienced investors do not calculate the yield to redemption rather than the straight yield. Wonderful things governments who need to borrow money, they have to bid for your savings just like anybody else.
Am I right in saying that if you purchase a Gilt Edged stock currently priced at £125 with a maturity date of 2015 then in 2015 the wonderful government will give you £100 guaranteed, no quibble!
Now I know that you will have received your six monthly income payment but for all the income you receive you will be guaranteed to lose £25 of your capital.
You will also have been taxed on your income at the appropriate rate of interest. You cannot of course offset your capital loss against any gains because gilts are exempt from any CGT?
So this is a ticking time bomb because too many inexperienced investors do not calculate the yield to redemption rather than the straight yield. Wonderful things governments who need to borrow money, they have to bid for your savings just like anybody else.
posted by Catch22 at 12:11 AM
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