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Income Investment Trusts - are these the times they (relatively...) shine?

General discussions about equity high-yield income strategies
TahiPanasDua
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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#365662

Postby TahiPanasDua » December 13th, 2020, 12:27 pm

Dod101 wrote:
88V8 wrote:
TahiPanasDua wrote:All income is paid into a holding account ....

This simple step, for us is a missing link.
Most of our divis flow through ii, previously TD and formerly NatwestStockborkers, and the 'push' facility whereby account balances flowed automatically into a nominated bank account, was long since removed.
Now, I have to go in periodically and move it manually.
Which if one becomes gaga, is not ideal.

V8


ATS used to that as well, but it is no great hassle to draw out money as required, although did someone not say that II have a facility to do that as well? Not that I have found it.

TP2 holds a lesson for anyone working abroad at the moment. Arrange to pay your Class 3 contributions. I doubt that you will get a better bargain! These secure the State pension for a UK expatriate (or at least did)

Dod


Dod,

HSBC, for example, has 2 kinds of very similar accounts, one of which transfers dividends automatically and one that doesn't. However, like you I can't recommend HSBC. (I will post an unbelievable 6 months saga of trying to transfer shares from Barclays to HSBC when it is finally complete. You won't believe it.)

You are absolutely spot on about expats paying National Insurance contributions when overseas. By the time I realized what a bargain it was, it was too late to achieve the minimum number of contributions. What a Dumbo!!!!

TP2.

Dod101
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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#365683

Postby Dod101 » December 13th, 2020, 1:45 pm

TP2

Slightly off topic but my UK based employer offered to deduct the Class 3 contributions from my monthly salary and make the payments on my behalf. That was easy for me. Otherwise I would probably have been in your position.

Dod

Arborbridge
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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#365726

Postby Arborbridge » December 13th, 2020, 3:42 pm

TahiPanasDua wrote:Apologies for repeating a point that has been discussed here many times in the past. The younger you are the greater the range of possible investment strategies. However, as we age the feasible range narrows considerably for many such as myself.

Leaving a stable income producing portfolio to my wife with minimal involvement on her part is a priority. She is highly educated and has enviable skills but negligible interest or knowledge in investment. ( I might also go gaga, indeed some would say I am well on the way!) As a result, buying or selling, harvesting capital gains, rebalancing, etc are out the window. She is terrified of having to do this. The only unavoidable chore is filing an online tax return so I have been coaching her by supervising her doing the online annual return. We are getting there!

I am 76 and am preparing for the worst by gradually converting individual shares to ITs, mostly income, and ETFs. We have no pensions, not even the state pension. Actually, I lie. My wife does have a paltry civil service pension of only 5k per year! That's it!

All income is paid into a holding account with a generous cash fall-back that will be familiar to many readers. Income ITs fit beautifully into this strategy. A "salary" is paid monthly into our normal spending account. It's about as effort-free as I can make it. I don't seem to have other options. as I wouldn't consider annuities.

TP2.


You and I -more or less parallel thoughts and developments. There is one difference for me: my wife does have a decent teacher's pension, not large but dependable. I'm 75, doing almost all the things you mention in the above. At the moment, I am just in the throes of working our what "salary" I shall pay myself from investments next year :? The expected income from all investments plus SP* is about 7% below what I forecast at this time last year. What I've actually booked as income this year is clearly less, though I won't bother to check until end of December. I expect to keep my salary constant for the moment, reinvesting the excess and maybe look at it in six months. With lockdown, I can manage well on less.

*Not counting anything on my wife's account, or income from BTLs.
Arb.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#365781

Postby TahiPanasDua » December 13th, 2020, 5:33 pm

Arborbridge wrote:
TahiPanasDua wrote:Apologies for repeating a point that has been discussed here many times in the past. The younger you are the greater the range of possible investment strategies. However, as we age the feasible range narrows considerably for many such as myself.

Leaving a stable income producing portfolio to my wife with minimal involvement on her part is a priority. She is highly educated and has enviable skills but negligible interest or knowledge in investment. ( I might also go gaga, indeed some would say I am well on the way!) As a result, buying or selling, harvesting capital gains, rebalancing, etc are out the window. She is terrified of having to do this. The only unavoidable chore is filing an online tax return so I have been coaching her by supervising her doing the online annual return. We are getting there!

I am 76 and am preparing for the worst by gradually converting individual shares to ITs, mostly income, and ETFs. We have no pensions, not even the state pension. Actually, I lie. My wife does have a paltry civil service pension of only 5k per year! That's it!

All income is paid into a holding account with a generous cash fall-back that will be familiar to many readers. Income ITs fit beautifully into this strategy. A "salary" is paid monthly into our normal spending account. It's about as effort-free as I can make it. I don't seem to have other options. as I wouldn't consider annuities.

TP2.


You and I -more or less parallel thoughts and developments. There is one difference for me: my wife does have a decent teacher's pension, not large but dependable. I'm 75, doing almost all the things you mention in the above. At the moment, I am just in the throes of working our what "salary" I shall pay myself from investments next year :? The expected income from all investments plus SP* is about 7% below what I forecast at this time last year. What I've actually booked as income this year is clearly less, though I won't bother to check until end of December. I expect to keep my salary constant for the moment, reinvesting the excess and maybe look at it in six months. With lockdown, I can manage well on less.

*Not counting anything on my wife's account, or income from BTLs.
Arb.


Hi Arb!

Of necessity, we have a simple method of assessing the monthly "salary" level. We ignore expected expenditure which might be a tedious calculation for a certain lazy person and simply transfer 90% of our previous annual income over 12 months to our spending account. We can do it this way because we always spend less and have to re-invest the excess. I don't want to imply we are loaded...we are not. Any other calculation method would be too much like work for me. Fortunately, we don't suffer from the urge to spend the last penny of income just because it's there. Everyone is different. During lockdown, like most people, our expenditure is way down so the excess is currently looking weighty. Nice problem to have.

TP2

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#366166

Postby Arborbridge » December 14th, 2020, 5:10 pm

TahiPanasDua wrote:Hi Arb!

Of necessity, we have a simple method of assessing the monthly "salary" level. We ignore expected expenditure which might be a tedious calculation for a certain lazy person and simply transfer 90% of our previous annual income over 12 months to our spending account. We can do it this way because we always spend less and have to re-invest the excess. I don't want to imply we are loaded...we are not. Any other calculation method would be too much like work for me. Fortunately, we don't suffer from the urge to spend the last penny of income just because it's there. Everyone is different. During lockdown, like most people, our expenditure is way down so the excess is currently looking weighty. Nice problem to have.

TP2


I didn't have a clue how much I needed as a pension when I retired. It took a couple of years to establish to right sort of level empirically rther than by fiddling about trying to guesstimate it. After that, I just increased the level by RPI which seemed to be less than the actual income flow into the "holding tank". This year, naturally, that has all been thrown into doubt, but it doesn't (at present!!) look as though we will have a difficulty making ends meet.

Arb.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#367409

Postby Arborbridge » December 18th, 2020, 2:27 pm

ReallyVeryFoolish wrote:
ReallyVeryFoolish wrote:I think the answer to the question above, is increasingly looking like "absolutely, yes".

RVF

FWIW, Questor in today's Telegraph agrees. Today he is tipping Law Debenture and Schroder Income Growth. I hold LWDB and it has behaved very nicely advancing from 500p to around 650p in a short space of time. I locked into a decent yield too.

RVF



How strange, SCF was the next possible IT topup and I was mulling over my LWDB which really deserves more capital it's served me so well lower down the yield scale.

Arb

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#367439

Postby monabri » December 18th, 2020, 3:18 pm

Arborbridge wrote:
ReallyVeryFoolish wrote:
ReallyVeryFoolish wrote:I think the answer to the question above, is increasingly looking like "absolutely, yes".

RVF

FWIW, Questor in today's Telegraph agrees. Today he is tipping Law Debenture and Schroder Income Growth. I hold LWDB and it has behaved very nicely advancing from 500p to around 650p in a short space of time. I locked into a decent yield too.

RVF



How strange, SCF was the next possible IT topup and I was mulling over my LWDB which really deserves more capital it's served me so well lower down the yield scale.

Arb


Yes, I thought you might "prioritise" LWDB over SCF based on viewtopic.php?p=358664#p358664 (ARBIT Nov 2020).

LWDB reserves are also higher.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#367465

Postby Arborbridge » December 18th, 2020, 4:23 pm

monabri wrote:
Arborbridge wrote:
ReallyVeryFoolish wrote:FWIW, Questor in today's Telegraph agrees. Today he is tipping Law Debenture and Schroder Income Growth. I hold LWDB and it has behaved very nicely advancing from 500p to around 650p in a short space of time. I locked into a decent yield too.

RVF



How strange, SCF was the next possible IT topup and I was mulling over my LWDB which really deserves more capital it's served me so well lower down the yield scale.

Arb


Yes, I thought you might "prioritise" LWDB over SCF based on viewtopic.php?p=358664#p358664 (ARBIT Nov 2020).

LWDB reserves are also higher.


Do you mean due to the difference in capital weight? I wouldn't be that fussy.
In any case. since both are in different broker accounts it would depend on what the resources are in each account and what else I might want to topup in that account - a HYP share, even!
I might even go for some of each, depending on the mood.

Arb.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#367476

Postby monabri » December 18th, 2020, 4:43 pm

Yes, it was a reflection on relative weights.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#367507

Postby Arborbridge » December 18th, 2020, 5:58 pm

monabri wrote:Yes, it was a reflection on relative weights.


Unlike HYP, where I keep the weights more or less balanced, with the ITs I don't bother. It's more a question of building up the ones I believe are serving my purpose, and occasionally those which seem depressed at the time. How often have I looked back at an IT and thought I should have bought when the price was down! Generally, they do recover again and revert to the mean - more reliably so than single shares.


Arb.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#490754

Postby Itsallaguess » April 1st, 2022, 7:31 am

I thought it might be worth updating the UK Equity Income Investment Trust table that we've been tracking dividend payments from through the COVID-related period, to show how well their dividend distribution has held up over the last reporting period -



So nothing to shoot the lights out with, but I think it's clear from the above multi-year record that apart from the Temple Bar blip, the income delivered by the above UK income-related Investment Trusts has generally held up well over the last two-year period, which I think fairly and positively answers the original question raised in my opening post on this thread, back in March 2020 -

So, is this the time for Investment Trust income-reserves to come into play?

Are we likely to see large numbers of single-share income-investments cut their dividends over the coming medium term?

If so, will the majority of income-IT's be able to ride out the issue using their income-reserves, and allow them to continue their normal distributions until the current health-scare issues can be improved?


https://www.lemonfool.co.uk/viewtopic.php?f=31&t=22053

Cheers,

Itsallaguess

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#490772

Postby monabri » April 1st, 2022, 8:48 am

Just a note of caution...the yields in the table are historic (March 20). Current yield on ASEI, for example, is 5.7%.

https://www.dividenddata.co.uk/investme ... =ASEI#ASEI

"Pendant" mode off.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#490775

Postby Itsallaguess » April 1st, 2022, 8:55 am

monabri wrote:
Just a note of caution...the yields in the table are historic (March 20).

Current yield on ASEI, for example, is 5.7%.

https://www.dividenddata.co.uk/investme ... =ASEI#ASEI


Yes - thanks for highlighting that - the 'Yield' column in the table contains the original yield data from 2020, with only the dividend data to the right updated as the thread has matured.

Thanks for pointing this out.

Cheers,

Itsallaguess

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503878

Postby Avantegarde » May 30th, 2022, 11:46 pm

Coming to this debate late, I think the OP is right. Looking at my portfolio, the various growth ITs like Scottish Mortgage and Edinburgh Worldwide (and a few others) have suffered big (and sometimes huge) falls in their share prices in the past 6-12 months. Meanwhile other income-focused ITs, which I ditched a few years ago because their total returns were dreadful, have had a decent year with positive total returns in double figures : City of London, Merchants, Henderson International Income and even that perennial sluggard Murray International. Thankfully investing in private equity trusts in the past two years has proved a very good idea, with excellent returns from HG Capital in particular.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503888

Postby Itsallaguess » May 31st, 2022, 6:35 am

Avantegarde wrote:
Coming to this debate late, I think the OP is right. Looking at my portfolio, the various growth ITs like Scottish Mortgage and Edinburgh Worldwide (and a few others) have suffered big (and sometimes huge) falls in their share prices in the past 6-12 months. Meanwhile other income-focused ITs, which I ditched a few years ago because their total returns were dreadful, have had a decent year with positive total returns in double figures : City of London, Merchants, Henderson International Income and even that perennial sluggard Murray International. Thankfully investing in private equity trusts in the past two years has proved a very good idea, with excellent returns from HG Capital in particular.


I should probably clarify that I initially raised this thread topic as a discussion and potential comparison of income-strategy investments really, where I wanted to consider whether the underlying benefits of the 'cash-reserves' that income-IT's are capable of using during periods of broad market stress might allow income-investors who use those types if income-IT's to benefit and see less disruption in their underlying investment income, when compared to income-investors who choose to hold 'single-share' (HYP) income-producing investments, rather than income-related IT's.

With that original premise in mind, and given that over two years has now passed since I started this thread, I think one of the best ways that might look to answer that original question on top of looking at the IT-income tables that can be seen earlier in this thread, might also be to take a look at Arb's multi-income-portfolio chart, where he tracks long-term income from both his 'ArbIT' portfolio of income-IT's (pink line on the chart below), and his 'ArbHYP' portfolio of single-share income-investments (dark line on the chart below) -

April 2022 chart showing Arb's long-term income-portfolio comparisons -

Image

Source thread for above chart- https://www.lemonfool.co.uk/viewtopic.php?f=31&t=34027&p=492795#p492737

The large COVID-related dip in income produced by the HYP single-share investments is clear to see on the above chart, and it's also clear to see that the income-IT-based portfolio has shown much more resilience in terms of continuing to deliver income over the recent COVID-related market turbulence.

Recently, we can also see that the income from the single-share ArbHYP portfolio is recovering strongly, although it's yet to reach either the scale or trajectory of the original pre-COVID period, whilst we can see that the ArbIT-based portfolio has taken a bit of a rest in recent quarters, which might be expected when we consider that income-IT managers will be looking to balance continuing payouts with a desire to nurture 'cash reserve' balances that are likely to have taken quite a hit over recent years due to being used in maintaining steadier income-delivery stream over that earlier period.

I hope the above explains the broad original intention of this thread, but I would add that your point regarding growth-investments is a good one, and I do note with some interest that there does seem to be a complete absence of what used to be really quite regular 'Total-return vs income investment' arguments on this forum over recent months...

Cheers,

Itsallaguess

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503899

Postby Avantegarde » May 31st, 2022, 7:39 am

Thanks. You might be interested in the example of (what was) the Standard Life UK smaller companies trust. Having drained its reserves in the past couple of years to maintain dividends, it now says it will be replenishing its reserves, implying that dividends will not grow much, if at all, in the next few years. Its rate of dividend growth has slowed down dramatically too.

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503903

Postby Dod101 » May 31st, 2022, 7:45 am

Avantegarde wrote:Thanks. You might be interested in the example of (what was) the Standard Life UK smaller companies trust. Having drained its reserves in the past couple of years to maintain dividends, it now says it will be replenishing its reserves, implying that dividends will not grow much, if at all, in the next few years. Its rate of dividend growth has slowed down dramatically too.


Presumably that means that they either do not have realised capital gains to use or are choosing not to use them, but it sounds like a stark reminder that ITs do not all have the ability to keep paying ever increasing dividends from income or capital. Of course a smaller companies trust is probably a special case.

Dod

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503912

Postby Itsallaguess » May 31st, 2022, 8:03 am

Avantegarde wrote:
You might be interested in the example of (what was) the Standard Life UK smaller companies trust.

Having drained its reserves in the past couple of years to maintain dividends, it now says it will be replenishing its reserves, implying that dividends will not grow much, if at all, in the next few years.

Its rate of dividend growth has slowed down dramatically too.


Yes, such outcomes wouldn't be a huge surprise to be honest, but it would be the price to pay for missing out on a huge jolt downwards in delivered income from single-share holdings, as shown in the ArbHYP income chart posted earlier.

Like most things in life, there's no 'free lunch' in all of this, and one income-investment strategy compared to another is likely to have some weighting that's dependant on just how 'manually involved' an income-investor wants to be with their long-term investments, and as someone who largely moved away from single-share income-investments some years ago, with a view to looking for an approach that needs much less manual involvement in my direct investments, I am happy to see that the primary aims of that move have been delivered for me, in that both my direct 'hands-on' involvement with my income-investments has been drastically minimised since doing so, and the broad portfolio-level income delivered from my largely income-IT holdings has been much, much smoother and more predictable in the years since.

Both of those aspects carry a significant weighting in my personal income-investment requirements, but I do think it's important to acknowledge that other approaches might be preferable where investors might consider other aspects to hold more important weightings in their own considerations...

I should also note that it's important to realise that not all geographical markets will recover from the recent market turbulence at the same pace, and one of the other aspects of my move to a much more income-IT based portfolio has been to be able to look at more diverse 'growthy' markets for significant portions of my income-IT holdings, where there might be a level of de-coupling in terms of the pace of recovery, when compared to low-growth markets like the UK, which I note is an area related to the Standard Life UK smaller companies trust that you mention...

In terms of this ongoing thread though, I certainly don't think we're in a position yet where we can start to claim any hard conclusions, and I'm just happy to have started this discussion two years ago, where we can now clearly note the robustness of the IT-based income delivery up to this point, and hopefully monitor things going forward now that we can see Arb's HYP income recovering somewhat, to see how both of those portfolio-level components do from here in the years to come...

Cheers,

Itsallaguess

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503925

Postby Dod101 » May 31st, 2022, 8:42 am

Then there is the 'middle of the road' approach which is what I like to think I take. I have a number of HYP like individual shares as well as some income ITs and some growth shares. I was much less badly hit by Covid as regards income, having lost significant dividend income from only HSBC, than Arb's HYP and largely recovered my income last calendar year. I may be up a bit this year but it is a too early in the year to say. As always, avoiding the highest flyers is my watchword. I think a mixture in income sources is the most sensible approach, especially if like me you are dependent on the income for day to day living expenses. It will be interesting to see how the income ITs get through the next few years as they rebuild their reserves.

Of course the chart only gives an indication anyway as it is the result from but one HYP. No doubt others will have a better outcome and some a worse one.

Dod

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Re: Income Investment Trusts - are these the times they (relatively...) shine?

#503964

Postby moorfield » May 31st, 2022, 11:16 am

Itsallaguess wrote:I am happy to see that the primary aims of that move have been delivered for me, in that both my direct 'hands-on' involvement with my income-investments has been drastically minimised since doing so, and the broad portfolio-level income delivered from my largely income-IT holdings has been much, much smoother and more predictable in the years since.



Yes, smoother and predictable are the key words here for me too, the most important quality I want from my income investments over the next 5-10+ years. I made a decision this year to start swapping my lower yield single share holdings into ITs (as you know I don't share others' penchants for holding, for income, single shares yielding less than some collective ITs; from a "robustness" of income perspective, I just don't see the point). Already my overall portfolio forecast income has ratcheted up again some ~15% this year, which is putting it on track to achieve its principal objective some five or six years earlier than planned.


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