Re: Income strategy for accumulation
Posted: December 2nd, 2021, 3:14 pm
Coming back to the title of this thread, then I have to say I agree with dealtn, in that it is the pot size at retirement that matters.
If one chooses to take a 'pure' HYP approach, investing in UK high yielding shares and re-investing dividends in the accumulation phase, then I think this is not the optimal way to build a retirement pot. This is simply because the shares being selected are too narrow, by excluding growth shares, and overseas shares. Certainly in the last decade you would have built a far larger pot investing in overseas shares (eg a world tracker), rather than the FTSE.
As one approaches retirement, then of course one would want to start building a portfolio aimed at providing income (unless one is willing to consider regular selling down of the portfolio to provide income). It is likely that one would want to switch to a different portfolio that is high yielding. How high depends on how big a pot has been accumulated, and how much risk you want to take.
It may be possible to invest a £1M pot in shares yielding 4% on average, which would provide an annual income of £40K. This could be a 'pure' HYP or a portfolio of higher-yielding investment trusts, or may include fixed interest investments.
For accumulation over a decade or more however, I would keep it simple and buy a world tracker.
FD
If one chooses to take a 'pure' HYP approach, investing in UK high yielding shares and re-investing dividends in the accumulation phase, then I think this is not the optimal way to build a retirement pot. This is simply because the shares being selected are too narrow, by excluding growth shares, and overseas shares. Certainly in the last decade you would have built a far larger pot investing in overseas shares (eg a world tracker), rather than the FTSE.
As one approaches retirement, then of course one would want to start building a portfolio aimed at providing income (unless one is willing to consider regular selling down of the portfolio to provide income). It is likely that one would want to switch to a different portfolio that is high yielding. How high depends on how big a pot has been accumulated, and how much risk you want to take.
It may be possible to invest a £1M pot in shares yielding 4% on average, which would provide an annual income of £40K. This could be a 'pure' HYP or a portfolio of higher-yielding investment trusts, or may include fixed interest investments.
For accumulation over a decade or more however, I would keep it simple and buy a world tracker.
FD