LTBH Income Generating IT Portfolio for comment

[BrummieDave]

For some time now, I've been meaning to show mine as others have previously done. As one who is quick to offer my views, I feel it's only fair to give others the opportunity to give me their views in return.

Firstly some context, without which any kind of review would be less meaningful. I'm mid 50s, retired, and drawing a DB pension that covers day to day 'bread and butter' expenses and leaves a little in the bank. Prior to accessing my pension, I'd built a pretty healthy pot, divided between two ISA accounts (mine and Mrs BD) and used predominantly a passive approach to grow the funds. Additionally, I have a DC pot still invested, also in global passives, plus a chunk of cash divided between P2P and a start up bank. A few years ago when reading TMF I made the choice to move the ISA funds into income generating ITs in readiness for a retirement full of activities other than monitoring my portfolio. I wanted to be Doris, and chose Luni's B7a as my landing ground. Not liking the number 7, and as the pot was to be split into two ISAs, I added CTY.

Along came my DB and I took a large tax free cash amount, and reviewed where to put it. As L'uni and others had also commented, I thought B7a plus CTY all looked a bit UK centric, this despite many of the ITs having FTSE 100 companies with large overseas business within them. I also thought it to be too equity focused and, eschewing Bonds other than the small amounts inherent in some equity income ITs, decided to add some Property and Infrastructure. I'd read several posts saying that too many ITs, with too great an overlap, isn't necessarily a good idea, but I kept seeing other ITs I fancied. So my compromise was to make a pretty significant commitment to a small number of ITs, then have a longer tail of smaller investments. I benefitted from PMing several other regular IT posting fools, so thank you, you know who you are.

I'm planning to take only the natural yield as income, and this would be would be the 'jam' that I can live without, but that I'm hoping will free me and my wife to live a very full active retirement. Using Morningstar's X-Ray tool some time ago, the portfolio's underlying investments are around 90% equities, equally divided 50:50 between UK and International, and 10% Property and Infrastructure. The running yield last time I looked, was around 4.4%.

Please note that I've purposely posted this on the IT/UT Board and not the Portfolio Review, hoping to avoid the "you should put it all in a tracker blah blah blah" responses that may otherwise be offered. I've made my decision, it's ITs for me, and I'm hoping to avoid tinkering, and be a real LTBH investor, enjoying things other than monitoring my investments.

So, with tin hat firmly in place, here it is:



NB I'm awaiting the cash settlement for JLIF after its recent acquisition and will reinvest the proceeds into SOI or more HFEL.

[gbjbaanb]

Weeelllll, you should put it all in a tracker.

you'll never get away from that, and there is a reason for it, when I looked at CTY I noticed that it was a very middle-of-the-road trust, always being around the index chosen to compare trusts with. So much so, that a FTSE 350 tracker almost perfectly matches it. Which is not surprising given its composition.

So for trusts like that, I would consider a passive investment instead.

However, where I feel trusts shine is in their ability to give me exposure to specialist sectors, eg WWH or IBT. If you only have trusts that invest in regions, they will naturally tend to buy the same stocks. How many of yours have exposure to, say, Amazon or Vodafone?

However these days I'd buy into something like Brunner or CGT (and I have done so) as I do feel the global markets are teetering on "not doing as well as before". I'd revisit my choice in a year and see how things are going.

But other than all that muttering from me, you get 4.4% yield that you don't worry about, if that's your aim, then I'd say that's successful.

[FoolishRix]

Thank you for posting this. As your selection (and long term intentions) almost exactly match mine I am taking some comfort from being in a (small) herd. It also make me think that I need to review how I weight my portfolio so thanks for that too.

[richfool]

Yes, thank you for posting your portfolio BrummieDave. Very interesting.

I note your largest holdings are in 2 Global IT's - MYI and STS, and that MYI has kept its exposure to the US low. I am not sure if that may make your portfolio light on the US, though I appreciate that MCT holds US stocks as well as Canadian.

In terms of geographical sectors, I hold more Global and less UK trusts than yourself. I hold AAIF, SOI and JAI instead of HFEL.

As well as having exposure to UK and Global sectors, I note you have some interesting holdings in property, infrastructure renewables and utilities, to provide diversity and "insulation". I have similar holdings in that respect.

I too prefer to hold active trusts rather than trackers. It will be interesting to see how the oft promoted trackers will perform compared to "actives" now that we seem to be entering choppy waters and downward trajectories!

[monabri]

Perhaps consider increasing the international exposure percentage ( thus reducing the UK percentage)?

[OZYU]

Thank you for sharing this, OK as a basket of ITs, but I would not have that many in a basket of collectives, and the distribution of weights is, imho, much too wide, since you don't need the income could be gradually corrected. Your very small weighted ITs will contribute too little.


Ozyu

[Avantegarde]

In general, I'd say you have too many investments. I'd have no more than 15. Also, I would compare the 5-year track record of each proposed trust with its relevant index tracker. If a trust can't beat its comparative index in that time then why have it at all? I would start with a core of trackers such as one for each of the FTSE All-Share, Europe ex UK, Asia/Pacific, S&P 500 and maybe the Japan Topix index. Then chose 10 trusts which can clearly offer something better either in terms of income, likely capital growth or a special investment focus of which you approve. In my view many UK-focused ITs are closet trackers and are not worth the money. You have at least seven of them.
Use the incredibly useful AIC statistics https://www.theaic.co.uk/aic/find-compa ... -companies to sort the wheat from the chaff. I hope that helps.

[Pendrainllwyn]

Thanks for sharing and best of luck with it.

Ecofin Global Utilities is tempting with a 12.5% discount and 5.3% yield but personally I cannot get my head around paying annual fees of 1.70%. Why does a fund that only has to look at one sector need such high fees? It's not a large fund but there are other funds of that size that charge far less. Is your desire to hold utility stocks (over and above what the other funds have purchased) strong enough to make the extra 0.7 to 1.0% you are paying over most of your other funds worthwhile? It's going to have to outperform by that much every year to make it pay off.

Pendrainllwyn

[richfool]

Thanks for sharing and best of luck with it.

Ecofin Global Utilities is tempting with a 12.5% discount and 5.3% yield but personally I cannot get my head around paying annual fees of 1.70%. Why does a fund that only has to look at one sector need such high fees? It's not a large fund but there are other funds of that size that charge far less. Is your desire to hold utility stocks (over and above what the other funds have purchased) strong enough to make the extra 0.7 to 1.0% you are paying over most of your other funds worthwhile? It's going to have to outperform by that much every year to make it pay off.

Pendrainllwyn

Pendrainllwyn, Yes, EGL's charges are high, though I note it doesn't just hold one sector, nor just in the UK, and the yield of course is net of charges.

It invests in utilities, renewables and infrastructure, and invests internationally:-

Europe 40%
USA 38%
UK 17%
Asia/EM 6%

[mickeypops]

Hi BrummieDve

Thanks for posting your portfolio. You were kind enough to post some commentary on my post recently which set out my IT retirement income portfolio.

We have very similar objectives, and a similar looking spread of asset types broadly. Mine has a higher yield and the 20 trusts I have are more equally balanced - although not perfectly so.

I wish you well with your retirement portfolio and I look forward to seeing how we perform relative to each other over the years.

Cheers

MP