Where do I get a return for little risk?

ASSET ALLOCATION

Last year was a great year for defensive funds, and another golden year for longer-dated corporate bonds.

It was not such a good year for holders of gilts. After a wonderful bull market for many years, the yields started to rise and prices to fall from the summer onwards. Even the magic ingredient of further quantitative easing was not sufficient to send the bonds higher again. The whole idea of quantitative easing is to drive people to take more risk. Short rates are as low as possible. Investors get very poor returns on bank deposits, in 3- or 6-month treasury bills, or on a 1-year gilt. Earning 0.5% to 1% when inflation is around 3% is not a great offer. The authorities want people to ...