Views on proposed income IT portfolio

[Bobwood]

As your pension income covers your needs, why reach for yield? A core set of cap weighted tracker funds covering the world market can be put together for an OCF of about 0.1% and would yield about 2% if you stuck to world cap weightings. Then add specialist ITs/UTs to provide the "spice" you are after.

My pension covers the basics but I'm looking for yield as an easy way to receive steady income to deliver the better things in life without the hassle of selling units/shares. So whilst I hadn't considered cap weighted tracker funds, I had wondered why I don't just put the whole lot into a high yielding ETF such as Global Dividend Aristocrats, and therefore gain global exposure and a steady return currently 4.5%.

But I suppose like lots of people on here, I like the hobby aspect of running a portfolio of ITs.

[GJHarney]

I would find room for the Acorn Income Fund (AIF) as it is an interesting mix of 70-80% smaller cap UK eqities and 20-30% international fixed interest (often currency hedged). Current yield of around 4%, but it has had significant overall capital growth too for many years and in my experience as a long-term holder is pretty consistent with it all. It took a bit of a knock in sentiment when previous lead manager John McClure sadly died a few years ago but is more than back on track with a continuation of his previous strategy. In my view it is a good wy of diversifying outside of UK large caps for income, while at the same time getting capital growth due to the small cap focus, which so far has been a win-win.

P.S., I also hold the global divi aristocrats that you mention (and their european one, which has done fantastically well) but it is not a physical assets ETF so while it would be highly unlikely to implode I do still worry about such things compared to the tried and tested IT basket strategy.

[Lootman]

I also hold the global divi aristocrats that you mention (and their european one, which has done fantastically well) but it is not a physical assets ETF so while it would be highly unlikely to implode I do still worry about such things compared to the tried and tested IT basket strategy.

Can you specify exactly which ETF you are referring to there? Because it was my understanding that SPDR ETFs do hold the underlying physical assets (insofar as shares can be described that way).

And even if it is not the physical assets themselves there is a huge difference between holding derivatives like options and futures (exchange-traded and therefore exposed to a trivial settlement risk) and OTC derivatives such as swaps and forwards, where there is credit risk with your counterparty. Likewise ETNs which are credit obligations of the issuer.

All that said, if a custodian bank like State Street, with a fortress-like balance sheet, goes bust then we are all in deep trouble anyway. State Street breezed through the 2008 financial crisis, for example.

[richfool]

This thread seems to be going off topic and off board. The OP's question was originally about IT's (Investment Trusts).
(This board is the IT & UT board). If the OP or others wish to enlarge the discussion into ETF's, maybe it would be more appropriate to post that under the "Passive Investing" board.

[scotia]

Another thought - your income is going to attract a fair amount of tax - even if you use your maximum ISA allowance. It may be worth looking at Venture Capital Trusts for a portion of your investments. A new issue VCT attracts a 30% Tax rebate on your tax bill, provided you hold for 5 years, and all dividends are tax free. Have a look at the VCT board for more information.

[Raptor]

Moderator Message:
This forum is to discuss Investment and Unit trusts. It has moved off topic many times. If we continue to deviate dramatically I will "lock" the topic or move the enitre thread to a "general" investment forum. Raptor.

[richfool]

Bob, I get my IT exposure to the US through NAIT and MCT, along with Global G&I IT's like: JPMorgan G&I (JPGI), Henderson International Income (HINT) and Invesco Perpetual Select Global Equity Inc trust (IVPG), plus Witan (WTAN) for Growth, and Personal Assets (PNL) for wealth preservation. All give US exposure.

[Steak]

Silly question perhaps but sorry I’m new. If a fund pays out 4% yield a month does this means it pays out 4% of my capital a month for 11 months. Obviously fees and varies etc?
Thanks

[flyer61]

Steak,

anything paying out 4% a monthwhich purports to be a fund/investment trust is probably a scam. Can you give us more details..name etc..

[Alaric]

If a fund pays out 4% yield a month does this means it pays out 4% of my capital a month for 11 months.

No (assuming it's a legitimate mainstream investment)

A quoted yield is the return per year. Funds vary in how frequently they distribute, either once, twice or four times a year. If they only distribute once a year, you would get the 4% in one month and nothing for the other eleven. The other point to note is that distributions are expressed as pence per unit. Yield is calculated by dividing this by the price of a unit or share, therefore will fluctuate with the price.

[Steak]

Many thanks. Just getting my head around investing for future income.

[Bobwood]

Thanks for all the feedback and ideas. I'm busy reflecting them into a revised plan and will issue my thoughts once complete.

[ADrunkenMarcus]

I would find room for the Acorn Income Fund (AIF) as it is an interesting mix of 70-80% smaller cap UK eqities and 20-30% international fixed interest (often currency hedged).

Agreed. I've held since May 2013 and been very happy with the high initial dividend yield, high dividend growth, and high total returns.

Best wishes


Mark.