Retirement (Decumulation) Portfolio vs Accumulation Portfolio

[SalvorHardin]

If you don't mind me asking Dod, what is your plan B, or how well do you think you might cope if we did endure a repeat of 1973/1974 type declines? Had say £500K paying £20K in dividends and a couple of years later had the equivalent of less than £125K paying £6K dividends. The few books I've seen by stock-heavy retirees after such hits seem to more often suggest they capitulated, to save what little remained. As did I believe Grouch Marx after the Wall Street Crash hit.

My asset allocation is similar to Dod's and I live off my dividends. Investing overseas is plan B for me (it's also plan A). A good example is that America's Dow Jones ondex fell by 45% during 1973-74, far less than the FT all share.

Diversification is easier nowadays than it has ever been. IMHO too many retiree investors cling to the FTSE100 like barnacles on the Hull of a ship (e.g. the popularity on TLF of the pure HYP with its ban on foreign investments and funds).

The key factor for me is that my dividends are far in excess of what I need. A 50% fall in dividends has no effect upon my lifestyle.

As to big capital losses, I've been there having experienced a 47% fall in 2008-09 financial crisis. My response was to sell most of my oil shares (I was massively overweight in oil explorers) and reinvest in strong moat shares, notably consumer goods (P&G, Unilever), Diageo and North American railroads.

[TUK020]

Just curious as to what changes people have made to their portfolio once in retirement as compared to what was invested in before retirement in the accumulation phase?

The big pension providers (and investment managers) seem to still go for "60% global equities / 40% global bonds" (or whatever variation they currently favour - 70/30 etc) and then switch over to mostly bonds at retirement to reduce risk.

What I'm interested in is what people are actually invested in retirement. I believe many in the UK opt for a home bias UK Equity Income portfolio (maybe combined with bonds to reduce risk). Has anyone here remained in, for example, a standard globally diversified accumulation fund and shunned bonds and HYP stocks/funds? (... And then just sold down accumulation units based on growth in the fund?)

Background
I retired about 18 months ago. I have since started work as a part time lecturer at a local college, but this is not for financial reasons.
A significant % of my total wealth is in property ( large family house in Surrey), and the majority of my pension income is from defined benefit schemes. As a result, I am very comfortable with being 'equity heavy' on the discretionary portion of my wealth.

Investment wrappers
about half of my total investments are in my ISA, and about half in my SIP. These have slightly different focuses.
SIPP is about generating income, to ensure sufficient cash generation to cover my monthly withdrawals (with more than half a year buffer). The monthly withdrawals are pitched at a level determined by my higher rate tax thresholds, rather than any safe withdrawal calculation. This will continue until my state pension age, at which point my SIP will go dormant - as a emergency reserve or alternatively an IHT efficient means of passing wealth onto my kids.
ISA is about growth - total return. I do not need to touch this at the moment, so most investments are growth rather than income. The intent is that the income will be available for luxury projects/travel/holidays, and the capital is my cushion for nursing home fees etc.

Investments
Within my SIP, the majority of my investments are income focused. Traditionally this was an HYP individual shares focus, but I am gradually transitioning this to income ITs. Part of the shift to ITs is for reasons of diversification - ITs enable easier geographical and sectoral diversification. But the main reason is to simplify the management of the investment portfolio. I am planning for the day I get less interested/capable of managing the portfolio - ITs become a more hands off way of dealing with this.
Within my ISA, I am making the same slow journey from investing in individual growth shares to investing in growth ETFs & ITs on a global stage.

Specific Investment choices
In the SIPP, I am heavily into tobacco (IMB & BAT) and Oil (RDS & BP) and also a wide variety of the usual HYP suspects. New funds are directed towards ITs such as CTY, MCH, MCT and so on.
In the ISA reinvestment is focused into L&G Global100, FCIT, and so on.
Things like RCP & LWDB surface in both portfolios.

Hedging
About 5% of the total portfolio is related to precious metal, roughly split between a physical metal gold ETF and a gold miners ETF. This is as portfolio insurance - I hope i never need to use this, but it is there in case Putin nukes Kyiv, or some other catastrophe, causing all equity and bond markets to tank.

Hope this helps. The big shift to retirement investing is the shift in focus from individual stocks to ITs & ETFs to simplify the management of the portfolio aka "long term gaga plan"

[hiriskpaul]

Well that would be when my index linked cash savings might have to be called upon, but I reckon I could reduce my spending by about 40/50% if I had to. A lot of it is discretionary at the moment.

Dod

This demonstrates a key aspect when it comes to retirement investing. The 1970s experience would have been ok for those who could (and did) rein in spending without too much trouble, and/or had a low withdrawal rate anyway.

I find it interesting that someone with 100% in the FTSE all-share and no other source of income could have continued drawing at 3% real (before tax) right through that period, even if they had started drawing down at the worst possible moment. The experience would have been truly horrible to the extent that I am sure most people would have been scared into cutting back, but the subsequent market recovery and 80s boom would have rescued them if they had ploughed on regardless.

I think a good question to ask oneself is If you start with a million, see it drop to £200k in a few years, how would you feel about continuing to take £30k+ out? If you don't feel happy about continuing, what is your plan B?

[hiriskpaul]

To get back to the original question, my own suggestion for someone with a hands off approach to investing is to stick to a cheap global tracker* for growth, with the rest in retail FSCS protected cash deposits or short dated gilts held to maturity if the tax savings with gilts warrant it. That cheap global tracker will outperform the majority of actively managed funds in the long run and the cash deposits will have a superior risk/reward profile than an investment grade bond fund.

Accumulation units are fine for the equities fund if you don't mind the additional complexity when it comes to the tax calculations for investments held outside ISAs/SIPPs, but it doesn't really matter whether you buy accumulation or income paying funds.

You could put some money into a higher yielding tracker such as VHYL if makes you feel happier, but don't fool yourself about the nature of dividends. Dividends are essentially a conversion of some of the capital in your equities portfolio into cash and it makes no difference to expected long term returns whether you do that conversion via dividends or disposals.

There are definite downsides to funds like VHYL though. The first is that a lot of foreign dividends are paid after withholding tax, typically about 15%, so going for a higher yielding fund such as VHYL will mean losing more in tax, even if you hold in a SIPP or ISA. The second is that you will pay a higher rate of management charge and there will be higher rebalancing costs compared with cap weighted trackers. It may not seem a lot, but those extra taxes and charges really do matter. 0.3% extra tax plus 0.2% management costs/friction = 0.5%. If you are drawing 4%, that 0.5% is 12.5% of your income.

How much to hold in cash compared with equities? That is the tricky part and there is no simple answer. Target dated funds start overweighting bonds as the retirement date approaches as a kind of generic prudent thing to do, but that approach is unlikely to be appropriate for many investors. If you have DB pensions and/or are able to cut back on spending easily then the extra risk with a higher allocation to equities is not going to bother you as much as it would if your savings and investments were your only source of income. Similarly if your withdrawal rate is low you can afford to take more risk. The flip side is if you have a low withdrawal rate, why are you bothering to take unnecessary risks? Asset allocation is very personal and comes down to attitude to and ability to take risks. That said, Warren Buffett has opted for 10% cash, 90% S&P 500 for his wife's retirement allocation. I rather suspect that she will have a very low withdrawal rate! To me, keeping 10% in cash for someone with no other source of income would be the lower limit and perhaps 50% the upper limit as most people really need some growth in their portfolios.

* You can spread your investment across geographical trackers instead of holding global trackers. That is what I do as it lowers the net management fees.

[Dod101]

Well that would be when my index linked cash savings might have to be called upon, but I reckon I could reduce my spending by about 40/50% if I had to. A lot of it is discretionary at the moment.

Dod

This demonstrates a key aspect when it comes to retirement investing. The 1970s experience would have been ok for those who could (and did) rein in spending without too much trouble, and/or had a low withdrawal rate anyway.

I find it interesting that someone with 100% in the FTSE all-share and no other source of income could have continued drawing at 3% real (before tax) right through that period, even if they had started drawing down at the worst possible moment. The experience would have been truly horrible to the extent that I am sure most people would have been scared into cutting back, but the subsequent market recovery and 80s boom would have rescued them if they had ploughed on regardless.

I think a good question to ask oneself is If you start with a million, see it drop to £200k in a few years, how would you feel about continuing to take £30k+ out? If you don't feel happy about continuing, what is your plan B?

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

On the other point re cash, I have about4 years expenses in the Index Linkers, but really they are a deliberate asset allocation play. They would serve as the ultimate back up. At this stage in the year, I tend to have a fair bit of cash from last year's surplus dividends and they just sit n my collection account until I decide what to do with them. My son has a significant anniversary coming up this year so quite a bit will go there.

Dod

[hiriskpaul]

Well that would be when my index linked cash savings might have to be called upon, but I reckon I could reduce my spending by about 40/50% if I had to. A lot of it is discretionary at the moment.

Dod

This demonstrates a key aspect when it comes to retirement investing. The 1970s experience would have been ok for those who could (and did) rein in spending without too much trouble, and/or had a low withdrawal rate anyway.

I find it interesting that someone with 100% in the FTSE all-share and no other source of income could have continued drawing at 3% real (before tax) right through that period, even if they had started drawing down at the worst possible moment. The experience would have been truly horrible to the extent that I am sure most people would have been scared into cutting back, but the subsequent market recovery and 80s boom would have rescued them if they had ploughed on regardless.

I think a good question to ask oneself is If you start with a million, see it drop to £200k in a few years, how would you feel about continuing to take £30k+ out? If you don't feel happy about continuing, what is your plan B?

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

Dod

Both trivial compared to the 1970s.

[Dod101]

Well that would be when my index linked cash savings might have to be called upon, but I reckon I could reduce my spending by about 40/50% if I had to. A lot of it is discretionary at the moment.

Dod

This demonstrates a key aspect when it comes to retirement investing. The 1970s experience would have been ok for those who could (and did) rein in spending without too much trouble, and/or had a low withdrawal rate anyway.

I find it interesting that someone with 100% in the FTSE all-share and no other source of income could have continued drawing at 3% real (before tax) right through that period, even if they had started drawing down at the worst possible moment. The experience would have been truly horrible to the extent that I am sure most people would have been scared into cutting back, but the subsequent market recovery and 80s boom would have rescued them if they had ploughed on regardless.

I think a good question to ask oneself is If you start with a million, see it drop to £200k in a few years, how would you feel about continuing to take £30k+ out? If you don't feel happy about continuing, what is your plan B?

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

Dod

Both trivial compared to the 1970s.

Well we could go back to 1929 if you want. Anyway, I was working abroad earning a crust in the 1970s so I truly have no idea.

Dod

[Adamski]

I'm semi-retired and are in de-accumulation. I've got a 60:40 portfolio, am firm believer in it, even though unfashionable here!


The bonds/gold/other non equities smooth the volatility and bonds are predicted by many to have a good year in 2023, after a shocking one last year.

Treasury bonds offer a risk free return of 4-5% suddenly looking attractive versus US/tech equities still on high PE even after correction.

Looking very long term 60:40 does well and beats long term inflation. Last year was a bit of freak year, and last 10 years of ultra low interest rates and recent tech bubble was probably the exception.

[Adamski]

Article may be of interest 60:40 portfolio may make a comeback after worst year since 2008..

https://uk.finance.yahoo.com/news/60-40 ... lFXp2xzUdi

[hiriskpaul]

Nothing much wrong with 60:40 equity/bonds as far as I am concerned. In the worst case scenarios of the 1970s that would have worked out better than 100:0. 60:40 equities:cash would have been better though, although most of the time 60:40 bonds works out better than 60:40 cash and 100% equities better still.

Do you want to go for higher likely returns or better likely outcomes in the worst case scenarios?

At a more simplistic level, if you want to roll the dice, which game do you want to play? 1) A 90% chance of a 10% return, 10% chance of 0% or 2) 90% chance of a 7% return, 10% chance of 2.7%?

You only get to play the game once!

[tjh290633]

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

Dod

Both trivial compared to the 1970s.

Well we could go back to 1929 if you want. Anyway, I was working abroad earning a crust in the 1970s so I truly have no idea.

Dod

I was in the UK and working in the 1970s. I bought one house in 1970 then sold it and bought another in 1978.we had a spurt of house price inflation in about 1973, then prices fell back a little before starting to shoot again in 1978. The stock market slipped in 1973-4 but recovered rapidly in the following year or so. My own records, which are fairly limited, suggest that dividend income continued at a similar rate throughout. I admit that most of my investments were in unit funds, with an emphasis on commodities, but my recollection is that this was fairly normal.

It should not be too difficult to look at a representative group of companies to establish the facts. Even as the market fell, dividends held up. Anyone relying on accumulation units or asset sale to live on would have been in trouble. I may be able to find some data to prove the point, but it could be hidden away.

TJH

[Dod101]

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

Dod

Both trivial compared to the 1970s.

Well we could go back to 1929 if you want. Anyway, I was working abroad earning a crust in the 1970s so I truly have no idea.

Dod

I was in the UK and working in the 1970s. I bought one house in 1970 then sold it and bought another in 1978.we had a spurt of house price inflation in about 1973, then prices fell back a little before starting to shoot again in 1978. The stock market slipped in 1973-4 but recovered rapidly in the following year or so. My own records, which are fairly limited, suggest that dividend income continued at a similar rate throughout. I admit that most of my investments were in unit funds, with an emphasis on commodities, but my recollection is that this was fairly normal.

It should not be too difficult to look at a representative group of companies to establish the facts. Even as the market fell, dividends held up. Anyone relying on accumulation units or asset sale to live on would have been in trouble. I may be able to find some data to prove the point, but it could be hidden away.

TJH

I think that is the real risk for anyone living off their investments, relying on selling shares or units to create an income. I have never done that nor would I. The doomsters tend to forget, as I have said before now, that dividends tend to hold up much better than capital in times of stress.

Dod

[hiriskpaul]

Well I have been through the tech boom and bust in 2000 and the 2008/9 financial crash and I bet no one saw any difference in my lifestyle, so I am fairly relaxed about the whole issue.

Dod

Both trivial compared to the 1970s.

Well we could go back to 1929 if you want. Anyway, I was working abroad earning a crust in the 1970s so I truly have no idea.

Dod

I was in the UK and working in the 1970s. I bought one house in 1970 then sold it and bought another in 1978.we had a spurt of house price inflation in about 1973, then prices fell back a little before starting to shoot again in 1978. The stock market slipped in 1973-4 but recovered rapidly in the following year or so. My own records, which are fairly limited, suggest that dividend income continued at a similar rate throughout. I admit that most of my investments were in unit funds, with an emphasis on commodities, but my recollection is that this was fairly normal.

It should not be too difficult to look at a representative group of companies to establish the facts. Even as the market fell, dividends held up. Anyone relying on accumulation units or asset sale to live on would have been in trouble. I may be able to find some data to prove the point, but it could be hidden away.

TJH

I think that is the real risk for anyone living off their investments, relying on selling shares or units to create an income. I have never done that nor would I. The doomsters tend to forget, as I have said before now, that dividends tend to hold up much better than capital in times of stress.

Dod

There is absolutely no difference, bar those produced by timing differences, between selling accumulation shares/units to provide an income and taking dividends from income shares/units. Depending on the period chosen and timing of the sales, accumulation units may provide better or worse total returns than income units. This assumes you take the same income of course!

[Dod101]

There is absolutely no difference, bar those produced by timing differences, between selling accumulation shares/units to provide an income and taking dividends from income shares/units. Depending on the period chosen and timing of the sales, accumulation units may provide better or worse total returns than income units. This assumes you take the same income of course!

There is no difference?

1. You could be a forced seller at exactly the wrong time with the one. With the other dividends arrive and you have the chance to accumulate them.
It is a bit like the difference between an investment trust and a fund in a bear market.

2. Dividends arrive in my bank account (or ISA or SIPP) with no effort on my part or worry about whether the underlying share will be higher or lower tomorrow. Selling shares or units means I decide on timing and may well get the timing less than optimal.

You could argue with some justification that there is no difference as far as the underlying investment is concerned because you are extracting the same value whether by taking dividends or by selling some capital. Even then it is not the same, because by taking dividends you are leaving the underlying investment untouched but by selling units you are depleting the underlying investment and thus changing the 'balance'.

For anyone living off their investments, it is the practical difference that is the most important element and to me, exactly in that position, taking dividends is by far the easiest. Theory is fine but for most of us it is the practice that really matters.

Dod

[hiriskpaul]

There is absolutely no difference, bar those produced by timing differences, between selling accumulation shares/units to provide an income and taking dividends from income shares/units. Depending on the period chosen and timing of the sales, accumulation units may provide better or worse total returns than income units. This assumes you take the same income of course!

There is no difference?

1. You could be a forced seller at exactly the wrong time with the one. With the other dividends arrive and you have the chance to accumulate them.
It is a bit like the difference between an investment trust and a fund in a bear market.

Yes you could. You could also take a dividend at a time when the market is down.

2. Dividends arrive in my bank account (or ISA or SIPP) with no effort on my part or worry about whether the underlying share will be higher or lower tomorrow. Selling shares or units means I decide on timing and may well get the timing less than optimal.

Yes your timing could be bad, but could also be good. Unless you can convince me that your market timing was atrocious, I would suggest this was a coin flip.

You could argue with some justification that there is no difference as far as the underlying investment is concerned because you are extracting the same value whether by taking dividends or by selling some capital. Even then it is not the same, because by taking dividends you are leaving the underlying investment untouched but by selling units you are depleting the underlying investment and thus changing the 'balance'.

Sorry, but this really is numerical gibberish.

[Dod101]

There is absolutely no difference, bar those produced by timing differences, between selling accumulation shares/units to provide an income and taking dividends from income shares/units. Depending on the period chosen and timing of the sales, accumulation units may provide better or worse total returns than income units. This assumes you take the same income of course!

There is no difference?

1. You could be a forced seller at exactly the wrong time with the one. With the other dividends arrive and you have the chance to accumulate them.
It is a bit like the difference between an investment trust and a fund in a bear market.

Yes you could. You could also take a dividend at a time when the market is down.

2. Dividends arrive in my bank account (or ISA or SIPP) with no effort on my part or worry about whether the underlying share will be higher or lower tomorrow. Selling shares or units means I decide on timing and may well get the timing less than optimal.

Yes your timing could be bad, but could also be good. Unless you can convince me that your market timing was atrocious, I would suggest this was a coin flip.

You could argue with some justification that there is no difference as far as the underlying investment is concerned because you are extracting the same value whether by taking dividends or by selling some capital. Even then it is not the same, because by taking dividends you are leaving the underlying investment untouched but by selling units you are depleting the underlying investment and thus changing the 'balance'.

Sorry, but this really is numerical gibberish.

I think we have taken this (pointless) argument as far as we can and I have nothing further to say. I stand by my original point I made this morning in response to TJH's post

Dod

[hiriskpaul]

Here is an example. $1m of the iShares S&P 500 income ETF (IUSA), bought on 2 Jan 2012 compared with $1m of iShares S&P 500 accumulation ETF (CSPX). Dividends paid approximately at the end of each quarter, accumulation units sold at the start of each quarter.

79752.40 income units held throughout, final value $3,035,411.

Code: Select all

date        | dividend
            |         
21/Mar/2012 |   $4,027
13/Jun/2012 |   $3,852
12/Sep/2012 |   $4,043
12/Dec/2012 |   $4,275
13/Mar/2013 |   $5,431
19/Jun/2013 |   $5,455
18/Sep/2013 |   $4,666
18/Dec/2013 |   $4,642
19/Mar/2014 |   $4,905
11/Jun/2014 |   $4,259
10/Sep/2014 |   $5,240
18/Dec/2014 |   $6,308
19/Mar/2015 |   $5,806
18/Jun/2015 |   $5,910
17/Sep/2015 |   $5,551
30/Dec/2015 |   $8,023
29/Mar/2016 |   $6,213
29/Jun/2016 |   $6,524
30/Sep/2016 |   $6,332
30/Dec/2016 |   $6,404
31/Mar/2017 |   $6,061
30/Jun/2017 |   $7,481
29/Sep/2017 |   $8,932
29/Dec/2017 |   $8,358
28/Mar/2018 |   $7,919
27/Jun/2018 |   $9,076
26/Sep/2018 |   $8,669
28/Dec/2018 |   $8,996
27/Mar/2019 |   $9,315
26/Jun/2019 |   $9,379
25/Sep/2019 |   $9,642
27/Dec/2019 |   $9,754
25/Mar/2020 |  $10,806
24/Jun/2020 |   $9,706
30/Sep/2020 |   $9,227
23/Dec/2020 |   $9,347
24/Mar/2021 |   $9,642
30/Jun/2021 |   $9,746
29/Sep/2021 |   $9,833
31/Dec/2021 |   $9,913
30/Mar/2022 |  $10,312
29/Jun/2022 |  $10,830
28/Sep/2022 |  $11,365
30/Dec/2022 |  $11,293
           


Accumulation units sold to raise cash matching income units dividends

Code: Select all

date        | dividend | NAV      | sold units | units    | value of units
02/Jan/2012 |          | 109.3224 |            | 9,147.26 |     $1,000,000
02/Apr/2012 |   $4,027 | 123.8428 |      32.52 | 9,114.74 |     $1,128,794
02/Jul/2012 |   $3,852 | 119.6905 |      32.18 | 9,082.55 |     $1,087,095
01/Oct/2012 |   $4,043 | 127.1282 |      31.81 | 9,050.75 |     $1,150,605
02/Jan/2013 |   $4,275 | 129.3545 |      33.05 | 9,017.70 |     $1,166,480
02/Apr/2013 |   $5,431 | 139.4259 |      38.95 | 8,978.75 |     $1,251,870
01/Jul/2013 |   $5,455 | 143.9849 |      37.89 | 8,940.86 |     $1,287,349
01/Oct/2013 |   $4,666 | 151.7257 |      30.75 | 8,910.11 |     $1,351,893
02/Jan/2014 |   $4,642 | 164.6838 |      28.18 | 8,881.92 |     $1,462,709
01/Apr/2014 |   $4,905 | 170.1421 |      28.83 | 8,853.10 |     $1,506,285
01/Jul/2014 |   $4,259 | 178.8364 |      23.81 | 8,829.28 |     $1,578,997
01/Oct/2014 |   $5,240 | 177.1079 |      29.58 | 8,799.70 |     $1,558,496
01/Jan/2015 |   $6,308 | 188.1339 |      33.53 | 8,766.17 |     $1,649,213
01/Apr/2015 |   $5,806 | 189.0110 |      30.72 | 8,735.45 |     $1,651,096
01/Jul/2015 |   $5,910 | 191.4549 |      30.87 | 8,704.58 |     $1,666,535
01/Oct/2015 |   $5,551 | 178.0104 |      31.18 | 8,673.40 |     $1,543,955
01/Jan/2016 |   $8,023 | 189.9890 |      42.23 | 8,631.17 |     $1,639,827
01/Apr/2016 |   $6,213 | 193.5520 |       32.1 | 8,599.07 |     $1,664,368
01/Jul/2016 |   $6,524 | 197.2769 |      33.07 | 8,566.00 |     $1,689,874
03/Oct/2016 |   $6,332 | 203.6327 |       31.1 | 8,534.91 |     $1,737,986
03/Jan/2017 |   $6,404 | 213.7103 |      29.97 | 8,504.94 |     $1,817,593
03/Apr/2017 |   $6,061 | 224.1901 |      27.04 | 8,477.90 |     $1,900,662
03/Jul/2017 |   $7,481 | 231.8321 |      32.27 | 8,445.64 |     $1,957,970
02/Oct/2017 |   $8,932 | 242.3570 |      36.86 | 8,408.78 |     $2,037,927
02/Jan/2018 |   $8,358 | 259.4067 |      32.22 | 8,376.56 |     $2,172,935
03/Apr/2018 |   $7,919 | 252.5541 |      31.36 | 8,345.20 |     $2,107,615
02/Jul/2018 |   $9,076 | 264.4472 |      34.32 | 8,310.88 |     $2,197,790
01/Oct/2018 |   $8,669 | 284.7267 |      30.45 | 8,280.44 |     $2,357,662
02/Jan/2019 |   $8,996 | 245.4310 |      36.65 | 8,243.78 |     $2,023,280
01/Apr/2019 |   $9,315 | 281.5293 |      33.09 | 8,210.69 |     $2,311,551
01/Jul/2019 |   $9,379 | 292.2588 |      32.09 | 8,178.60 |     $2,390,268
01/Oct/2019 |   $9,642 | 291.1021 |      33.12 | 8,145.48 |     $2,371,167
02/Jan/2020 |   $9,754 | 323.8796 |      30.12 | 8,115.37 |     $2,628,401
01/Apr/2020 |  $10,806 | 246.6004 |      43.82 | 8,071.54 |     $1,990,446
01/Jul/2020 |   $9,706 | 312.2870 |      31.08 | 8,040.46 |     $2,510,933
01/Oct/2020 |   $9,227 | 340.0305 |      27.14 | 8,013.33 |     $2,724,775
04/Jan/2021 |   $9,347 | 373.4404 |      25.03 | 7,988.30 |     $2,983,153
01/Apr/2021 |   $9,642 | 406.9152 |       23.7 | 7,964.60 |     $3,240,918
01/Jul/2021 |   $9,746 | 438.5528 |      22.22 | 7,942.38 |     $3,483,153
01/Oct/2021 |   $9,833 | 443.5392 |      22.17 | 7,920.21 |     $3,512,923
04/Jan/2022 |   $9,913 | 489.3387 |      20.26 | 7,899.95 |     $3,865,752
01/Apr/2022 |  $10,312 | 465.4107 |      22.16 | 7,877.79 |     $3,666,409
01/Jul/2022 |  $10,830 | 392.9631 |      27.56 | 7,850.23 |     $3,084,852
03/Oct/2022 |  $11,365 | 379.1576 |      29.97 | 7,820.26 |     $2,965,111
03/Jan/2023 |  $11,293 | 395.6634 |      28.54 | 7,791.72 |     $3,082,898
           


Final value of income units $3,035,411, final value of acc units $3,082,898.

[hiriskpaul]

There is absolutely no difference, bar those produced by timing differences, between selling accumulation shares/units to provide an income and taking dividends from income shares/units. Depending on the period chosen and timing of the sales, accumulation units may provide better or worse total returns than income units. This assumes you take the same income of course!

There is no difference?

1. You could be a forced seller at exactly the wrong time with the one. With the other dividends arrive and you have the chance to accumulate them.
It is a bit like the difference between an investment trust and a fund in a bear market.

Yes you could. You could also take a dividend at a time when the market is down.

2. Dividends arrive in my bank account (or ISA or SIPP) with no effort on my part or worry about whether the underlying share will be higher or lower tomorrow. Selling shares or units means I decide on timing and may well get the timing less than optimal.

Yes your timing could be bad, but could also be good. Unless you can convince me that your market timing was atrocious, I would suggest this was a coin flip.

You could argue with some justification that there is no difference as far as the underlying investment is concerned because you are extracting the same value whether by taking dividends or by selling some capital. Even then it is not the same, because by taking dividends you are leaving the underlying investment untouched but by selling units you are depleting the underlying investment and thus changing the 'balance'.

Sorry, but this really is numerical gibberish.

I think we have taken this (pointless) argument as far as we can and I have nothing further to say. I stand by my original point I made this morning in response to TJH's post

Dod

And I stand by mine.

[CliffEdge]

I stand by the kettle.

[dealtn]

It should not be too difficult to look at a representative group of companies to establish the facts. Even as the market fell, dividends held up. Anyone relying on accumulation units or asset sale to live on would have been in trouble. I may be able to find some data to prove the point, but it could be hidden away.

TJH

Anyone relying on accumulation units could have had exactly the same outcome as those holding income units by selling the exact equivalent amount of (reinvested) dividends.

No need to look for "hidden away" data. It exists and applies at all times and can be shown by looking at any equivalant fund offering both types of units at any time or over any period (excepting frictional costs such as trading expenses and taxes).