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ETF vs Investment Trusts B7 30 month review

General discussions about equity high-yield income strategies
runnygum
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ETF vs Investment Trusts B7 30 month review

#106516

Postby runnygum » December 29th, 2017, 6:59 am

This might be of interest to those wondering which asset type works best.

I was lucky enough back in mid 2015 to sell a business.

I put pretty much equal weight and equal amounts into separate accounts. One ETF the other Investment trusts. Basically the B7 portfolio from Luni.

So where are we today.
Well..

ETF are 27.28% up in capital returns
IT are 20.81% up

Distributions are for ETF 3% lower than for the Investment Trusts.

ETF's are a mix of global dividend payers like Emerging Markets, European and World Wide, VHYL etc.

The Trusts took a big dive at one point being down around 15% after brexit and have only recently come back.
The portfolio is a LTBH one for income. On that basis so far so good.

Yield is roughly 3.3% on both.

Finally I have a hodge podge of Bonds, VCT's, Stocks, ETF's and IT's from legacy investing on another platform. That also Yields 3.3%
So it seems to me that I must be pretty well diversified across all 3 to have the same yield.

One point to note is that the B7 portfolio was purchased without regard to current price. The ETF portfolio was targeted mainly at sectors which were beaten down at the time. Europe and Emerging markets. This is likely reflected in the capital growth.

Dont ask me what the growth of the mixed portfolio was. I dont have a common baseline to work from :(

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Re: ETF vs Investment Trusts B7 30 month review

#106615

Postby BrummieDave » December 29th, 2017, 2:11 pm

That's a really interesting post.

I'm familiar with Luni's B7 so would be very interested in the breakdown of TR and distributions of its respective ITs, and also if possible the make up of your ETF portfolio. Do you hold GBDV (SPDR Global Dividend Aristocrats) and if so, how has that performed in both TR and distribution growth?

Fully understand if you either haven't got this detail or don't wish to share, but your OP is fascinating at the high level, and I'm interested in exploring it more.

Lootman
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Re: ETF vs Investment Trusts B7 30 month review

#106618

Postby Lootman » December 29th, 2017, 2:17 pm

runnygum wrote:ETF are 27.28% up in capital returns
IT are 20.81% up

ETF's are a mix of global dividend payers like Emerging Markets, European and World Wide, VHYL etc.

I don't recall the exact composition of Luni's B7 portfolio, but I do recall that it was fairly UK-focused, whereas it sounds like your ETFs are more globally diverse.

The start date of your portfolios pre-dates Brexit. Whilst UK shares recovered from their Brexit swoon, the pound has not (much anyway). So right there I think is the cause of a good part of your ETF out-performance, i.e. the currency boost. (And yes, many UK shares also get a boost if they are foreign earners but that's not such a direct relationship and you still have the political risk).

So if I had to guess I would attribute the success of your ETF portfolio as being a reward both for being more globally diversified (US, Europe and the emerging markets have all done very well these last 2-3 years) and for being more diversified in terms of currency and political risk. And that political risk still exists, both in terms of Brexit and the possibility of Corbyn being PM, so I would not be UK-centric now either.

forlesen
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Re: ETF vs Investment Trusts B7 30 month review

#106623

Postby forlesen » December 29th, 2017, 2:37 pm

I agree it's an interesting comparison, and I'd like to hear more details if you are willing to share them (e.g.which percentages of which ETFs / ITs, starting date for comparison.

One point that concerns me a little is that although B7 is a somewhat diverse mix of ITs, it's pretty heavily UK weighted overall, approximately 70% according to my B7 portfolio on Trustnet, although this might be different for your version of B7. (I equal weighted my basket at the nominal start date of 1/1/2000, and have not rebalanced, so my B7's constituent weights now vary from 7% to 20%.)

It sounds like your ETF basket is more globally oriented. So the performance difference might be more down to UK vs Global factors than IT vs ETF. As evidence, note that from Mid 2015, the FTSE World index is up around 40% on a capital return basis, compared to under 20% for FTSE All Share.

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Re: ETF vs Investment Trusts B7 30 month review

#106649

Postby BrummieDave » December 29th, 2017, 4:09 pm

Yes, B7 was mostly UK centric, with two Global Equity ITs (Bankers, which is more capital growth than equity income anyway, and Murray International) and the rest large cap biased UK except for Lowland which looks beyond the FTSE 100 of course. So I would expect the two global to have done well in TR terms more recently, and Mercantile too with its focus on capital growth compared to some of the other relatively higher yielders.

I'm always interested to hear people's views on these ITs compared to SPDR Dividend Aristocrat ETFs , global (GBDV) and UK (UKDV), and other ITs for a LTBH income focused portfolio.

Good original post, good discussion this.

runnygum
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Re: ETF vs Investment Trusts B7 30 month review

#106780

Postby runnygum » December 30th, 2017, 10:45 am

Yes good point on the currency angle.

Here is the ETF list and growth % from July 2015
IAPD + 25.33%
EMDV +18.18%
EUDV +40.17%
GBDV +29.15%
VHYL +32.99%
EEI +23.83%

I have some APEX and ESP in this account, but its very minor

B7
BNKR +37.52%
FCI +28.31%
JCH +18.02%
LWI +10.39% (Was one of the better ones, but they sold out of commodity stocks too early on the rebound!)
MYI + 30.69%
PLI -6.9% (Ex woodford stuff, taking a dive. But LTBH says return to mean will come!)
MRC +29.45%

I note BNKR has quite a bit of FANG stocks

Distributions would take quite a bit more work and I would need to unitise etc so Ill leave that for those interested to trawl the web for dividends paid and generate this themselves :)

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Re: ETF vs Investment Trusts B7 30 month review

#106812

Postby Lootman » December 30th, 2017, 1:41 pm

runnygum wrote:Here is the ETF list and growth % from July 2015
IAPD + 25.33%
EMDV +18.18%
EUDV +40.17%
GBDV +29.15%
VHYL +32.99%
EEI +23.83%

Is there a reason why you don't have a US-based ETF there? The US currently accounts for a little over 50% of the global market cap, and the top ten global shares by market cap are all US names.

USDV would appear to be thematic, although I would personally go for an S&P 500 ETF to capture the big growth names.

runnygum
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Re: ETF vs Investment Trusts B7 30 month review

#106850

Postby runnygum » December 30th, 2017, 7:21 pm

Yes the ETF basket was a value tilt at the time. Kind of towards what the FT recently discussed as "Stalin's portfolio" EM for the long haul.

US was overpriced and I had a large swag of FRCL. Since sold to rerisk my SIPP.
SIPP = Bonds
Standard unwrapped investments = Stocks

There is quite a bit of US stuff in other investments I have such as Fundsmith and some of the IT's
Though if I were to do it all again I might be tempted just to put the whole lot into VWRL. Vanguards world wide index.

The idea over time is to go passive and stop micro managing.

These investments comprise 100% of my income now.

runnygum
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Re: ETF vs Investment Trusts B7 30 month review

#175133

Postby runnygum » October 20th, 2018, 2:10 am

Updated for month 40.

B7 slump to 40 month capital return of 11.04% (brexit and trade wars)
BNKR +30%
FCI +19%
JCH +13%
LWI +1%
MYI + 14%
PLI -18%
MRC +14%

Lucky dividends were paid at a trailing 3.56%

The ETF's faired better, but still got a hammering with the emerging markets tilt

ETF's +18.40% 40 month return

IAPD + 10%
EMDV +6%
EUDV +29%
GBDV +23%
VHYL +26%
EEI +16%

Again, trailing 12 month yeild of 4.10% helped sooth the pounding :)

runnygum
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Re: ETF vs Investment Trusts B7 30 month review

#178155

Postby runnygum » November 5th, 2018, 8:56 am

I've been saving the cash for a rainy day and doing the odd reinvestment eg SSON.

Plus I'm in early retirement so it's my income.

I'm mainly derisking by holding more in cash. Currently around 7% of the total.


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