The Lemon Fool

tjh290633 wrote:

Wizard wrote:So in your view, for a pot builder you think it better to have a smaller pot as long as you have more income that is not yet being drawn. Bizarre.

Not at all. My view is that the objective is to build a growing income from dividends and to reinvest them until required.

Your view is that it is better to hold on to a non-payer that has fallen from its previous levels, which I do not understand.

TJH

Well I guess we will not agree, I do not know how somebody can prefer income when it is not required at the expense of a lower income at a time when it will be needed. You prefer the income now when it is not required in exchange for a lower income in the future. As somebody here frequently says, each to their own.

TUK020 wrote:

daveh wrote:Well BT have recently told me they are removing my analogue phone soon and my phone is going digital. Now I need to set up the new router they sent me a while ago, as that's what supports the digital voice service. I live in the middle of no where so it's not confined to towns and cities.

Dave,
as a matter of interest, what do they say about battery back up etc for the digital phone?
One of the interesting side points of the analogue phone service was the battery back up from the exchange, so if would even operate in a power cut.
tuk020

I've got fibre to the home, the fibre box is plugged in to power but has battery backup as when there has been a power cut it shows a charging light. But the phone base station requires power so the phone doesn't work without power. I guess the router also won't work without power and the phone is plugged into that. They do say if you have a burglar or pendant alarm you shouldn't move to digital voice and give a contact number to call.

Wizard wrote:Well I guess we will not agree, I do not know how somebody can prefer income when it is not required at the expense of a lower income at a time when it will be needed. You prefer the income now when it is not required in exchange for a lower income in the future. As somebody here frequently says, each to their own.

You prefer total return. If you look at the relative values of the FT350HIX TR and FT350LIX TR, you may understand it better.

It is how you get your total return that matters.

TJH

tjh290633 wrote:

Wizard wrote:Well I guess we will not agree, I do not know how somebody can prefer income when it is not required at the expense of a lower income at a time when it will be needed. You prefer the income now when it is not required in exchange for a lower income in the future. As somebody here frequently says, each to their own.

You prefer total return. If you look at the relative values of the FT350HIX TR and FT350LIX TR, you may understand it better.

It is how you get your total return that matters.

TJH

We were not talking generically, we were discussing a specific example. You said you did not see why anybody should regret switching out of BT (and others) then seeing it provide a much better return than the shares the funds were recycled in to. You seemed to justify this by saying the shares that performed less well were worth switching ito for the dividend. I said if it were me I would regret it as the switch would have given me a smaller pot than if I had stuck with BT et al. It was not intended to be a deeply theoretical TR versus income share debate, well not by me any way.

Wizard wrote: It was not intended to be a deeply theoretical TR versus income share debate, well not by me any way.

TR is just a measuring rod. If you stop the music immediately after all dividends have been reinvested, it becomes a simple comparison of market values. Is the market value of the portfolio in which no switch took place higher or lower than one where the switch happened?

If you are building a pot over a long period to deliver income at retirement, you probably should not be buying any individual shares at all, but a global equity tracker.

Unless you have exceptional stock picking skills, or are just plain lucky, you will build a bigger pot with a tracker that invests in the largest and most profitable companies worldwide.

At retirement, when you need income, you have 2 choices:

1. Keep your investment intact, and regularly sell down capital to provide your income.

2. Invest in income generating assets to produce enough income for your needs, and sit back and let the market do the rest.

What could possibly go wrong?

FD