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A serious portfolio question

General discussions about equity high-yield income strategies
tjh290633
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Re: A serious portfolio question

#138424

Postby tjh290633 » May 11th, 2018, 7:17 pm

colin wrote:Hello TJH
how many shares should be held in the portfolio and how much would it cost to buy those shares?
How do you suggest the portfolio is managed? as simple buy and hold or some element of active management? What should be done as shares rise or fall in value? and how would dividends best be reinvested ? How should money be withdrawn , by selling a portion of each share so the portfolio balance remains the same or would it be better to use some other method? How might one choose suitable shares for such a portfolio and would they remain suitable as the child grows up? Any opinion you might have would be greatly appreciated I am sure.
Thanks

That's a matter of personal choice. With £20,000 to invest 15 shares would be feasible, but 10 if you felt that more would be too many. Back when PEPs were introduced, you could only invest £2,400 in the first year. I chose 3 shares and a fund.

Strategy is again personal choice. You might plan to add £20,000 each year, in which case maybe 4 in the first year and 4 in subsequent years. Once the total has got to 20, say, then start building up underweight holdings, or adding to those with the better dividend record. In general, ignore fluctuations in share price, but if a share goes on a runaway rise, trimming back at some stage may be advisable. Back in 1997, when I had 18 holdings, Lloyds-TSB and Zeneca both shot up above 10% of the total, so I decided that 10% was a sensible limit and trimmed them back. Later, when I had over 20 holdings, I worked on twice the median holding value and now, with 30-plus holdings, I work on 1.5 times the median. The value of holdings does affect what you do, of course. Say you started at £5,000 per share, one rises to £12,000 so you decide to trim back. You could trim by £5,000 and buy an extra holding, or spread it around lower valued holdings.

If a share ceases paying dividends, with little prospect of resumption, then dumping them may be a good move.Not always, as the market can be perverse. Myobjective is dividend income, so if a share rises so much that the yield falls significantly below about half that of the market, then it may be time to wave it goodbye and reinvest the procees in a new share with a yiled 3 or 4 times higher. At the moment I have Pearson and Tesco, both of which have yields below 2%. I also have Indivior, which does not pay dividends, and which is my first likely candidate for the chop. I'm in no hurry, as the share price has kept on rising.

If you look in the Financial Software forum, you should find links to spreadsheets which help select candidates for adding to a portfolio and which may need topping up.

For a child you are looking at Total Return, of course. As long as that is satisfactory, there is little need to do much, other than adding to the portfolio in whichever way you choose.

TJH

colin
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Re: A serious portfolio question

#138455

Postby colin » May 11th, 2018, 11:30 pm

Thanks for your comments TJH, though I think if I were in Minerjoes situation I would be making use of Occam's razor.

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Re: A serious portfolio question

#138630

Postby Muddywaters » May 12th, 2018, 9:04 pm

I have a 3 and 1 year old. Both lifestrategy 100 acc for me. Fire and forget monthly contributions into jisas

OhNoNotimAgain
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Re: A serious portfolio question

#139123

Postby OhNoNotimAgain » May 15th, 2018, 9:16 am

tjh290633 wrote:
colin wrote:
On that point I am thinking of setting aside £4k to start the pot off.


work out how much it will cost you to reinvest dividends , it's not really worth buying individual shares unless you have a portfolio value of 100K or more,the transaction costs as a percentage of the portfolio is just too high. So go for some kind of fund that accumulates dividends.

If you are adding to your pot from time to time, then just add the accumulated dividends to the sum available to buy new shares. If you are in a platform which charges a percentage to reinvest dividends, then you can choose that route, otherwise let them build up until you have enough to make an economic purchase.

Funds suffer from the level of ongoing charges, or from initial charges if applied.

TJH


and brokers charge you an inactivity fee.

Anyone holding your shares for you incurs custodian costs and you have to pay that one way or another.

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Re: A serious portfolio question

#139179

Postby toofast2live » May 15th, 2018, 12:53 pm

and brokers charge you an inactivity fee.
.


Not my broker, Hargreaves Lansdowne. Pretty low annual charge for holding shares as well. I wouldn’t bother with a broker that charged inactivity fees unless dealing cost was very low.

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Re: A serious portfolio question

#139217

Postby DiamondEcho » May 15th, 2018, 5:17 pm

OhNoNotimAgain wrote:and brokers charge you an inactivity fee. Anyone holding your shares for you incurs custodian costs and you have to pay that one way or another.

Not sure which brokers you're talking about, but thought I should highlight that most brokers are earning income from stock-lending your long positions.

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Re: A serious portfolio question

#139351

Postby OhNoNotimAgain » May 16th, 2018, 12:08 pm

DiamondEcho wrote:
OhNoNotimAgain wrote:and brokers charge you an inactivity fee. Anyone holding your shares for you incurs custodian costs and you have to pay that one way or another.

Not sure which brokers you're talking about, but thought I should highlight that most brokers are earning income from stock-lending your long positions.


Brokers do not lend stock, or at least they shouldn't, fund managers might.
Everyone involved in holding other people's assets has to pay custodian fees and probably Trustee fees as well. In addition they have to fund Tier 1 capital that just sits there doing nothing. But costs a lot to build up.

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Re: A serious portfolio question

#139399

Postby DiamondEcho » May 16th, 2018, 4:38 pm

OhNoNotimAgain wrote:Brokers do not lend stock, or at least they shouldn't, fund managers might.

Interactive Brokers do, and I get paid part of the income they earn from lending my positions.
'Stock Yield Enhancement Program FAQs https://ibkr.info/node/1838/

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Re: A serious portfolio question

#139595

Postby OhNoNotimAgain » May 17th, 2018, 3:32 pm

DiamondEcho wrote:
OhNoNotimAgain wrote:Brokers do not lend stock, or at least they shouldn't, fund managers might.

Interactive Brokers do, and I get paid part of the income they earn from lending my positions.
'Stock Yield Enhancement Program FAQs https://ibkr.info/node/1838/


Oh OK, you learn something new every day. I assume it is a US broker, does it lend out UK stocks and what is the income?

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Re: A serious portfolio question

#139616

Postby DiamondEcho » May 17th, 2018, 4:27 pm

I can't currently say as I'm enrolled but have been ineligible for a few years while I've been on margin. But by July I'll be margin free so will focus on it again. What I can say though is that for UK shares it's [or was] only worthwhile enrolling if you hold some of the more 'mega-cap' shares in the FTSE-100, that's where their stock-lend business seemed focused for the LSE.
I'm sure you cld google on say FTSE-100 stock-lend fees and get a rough idea, then that linked IB-FAQ breaks down how they split the income with clients.

ps. It is a US parent company, but that's effectively transparent to me. As I've moved around for work they've flipped my entity from London to Hong Kong, and currently another subsidiary of theirs. I only notice if I need to call them, I have to re-check the contact number for the applicable regional office.

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Re: A serious portfolio question

#159630

Postby Gadge » August 14th, 2018, 6:26 pm

Worth bearing in mind that if you buy a fund such as Vanguard life strategy you may well be incurring nasty platform fund holding costs.

Vwrl may be a cheaper solution on many platforms.

Gadge


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