The Lemon Fool

I am considering moving from direct investing in specific UK based HYP like shares to a more passive approach.

Ideally I would like to get more of a worldwide exposure but as I am for best described as semi-retired I would like to see at least some distributions being paid so I have the option of taking some income or invest these as required. I have 15-20 years until "official" retirement so there is some room for some growth selections.

As I am currently blinded by the number of options I would like to get some ideas so I can do some research.

Is anyone happy to post a suggested ETF based portfolio?

Was thinking something like this but not really sure - good / bad - better suggestions?
Vanguard VWRL for Global Growth 60%
iShare IUKD UK Dividends for Income 20%
iShare IDVY Euro Dividends for Income 20%

Thanks

In my SIPP I have a spread of passives and use all vanguard and specifically exclude UK as I too have a direct HYP.

I have VUSA for S&P500, VERX for Europe xUK, VAPX for pacific excluding Japan, VJPN - for Japan, VFEM - emerging markets. Depending on how you weight them there is a yield to be extracted there but a couple of percent.

With regard to income biased UK ETFs, IUKD has not performed terribly well.

A couple of possibilities that you might look at are Lyxor UK Quality Low Volatility Dividend (DOSH) and BMO UK Income Leaders (ZILK)

European Income ETFs there is Wisdom Tree European Equity Income (EEI)

Whether these are appropriate for you is something you need to research for yourself.

For clarity, I hold positions in all three, for the UK my personal preference is an even split between a FTSE and FT250 ETFs, yield is reasonable, cheap, more exposure to UK domestic markets, less concentration risk and very cheap !

I think I have decided on the following but if anyone has any comments that would be great.

Any suggestions for ETF candidates for the Pacific Region, the Emerging Markets region and increasing Income generation keeping costs as low as feasible to give me a starting point for research would be a help.

Vanguard FTSE100          VUKE    12.5%
Vanguard FTSE250          VMID    12.5%
Vanguard S&P 500          VUSA    50%
Vanguard Europe Exc UK    VERX    25%

Thanks

tlf67482 wrote:I think I have decided on the following but if anyone has any comments that would be great.

Any suggestions for ETF candidates for the Pacific Region, the Emerging Markets region and increasing Income generation keeping costs as low as feasible to give me a starting point for research would be a help.

Vanguard FTSE100          VUKE    12.5%
Vanguard FTSE250          VMID    12.5%
Vanguard S&P 500          VUSA    50%
Vanguard Europe Exc UK    VERX    25%

Thanks

Why the specific weightings? It puts you massively overweight in the UK, which is quite a brave decision in current circumstances. If you want to go passive, 90% in VEVE [ Vanguard FTSE Developed World UCITS ETF GBP ] and 10% in VFEM [ Vanguard FTSE Emerging Markets Ucits Etf ] and you are done. Both distribute.

@genou

Any decision re overseas / UK exposure is overshadowed by the currency factor, it seems likely is either undervalued/over valued by a fair margin and the market ( nobody ?) really knows ! It's hard to make any rational change in currency allocation when we have so much uncertainty.

Possibly a bit late for you, but I'll post this in case someone else is looking at this topic in future.

It's entirely doable (my own SIPP portfolio is entirely ETF based) and can be very advantageous in terms of broker fees (e.g. HL fee limit of £200 pa. for EFTs and IVTs)

(soapbox mode on) My personal advice is to take the trouble to track down currency-hedged versions of anything that tracks an index whose base currency isn't in GBP. That restricts your choice a fair bit on the equities side, but since we are in the 'passive investing' part of the board I assume you would prefer not to 'mix your drinks' between investing and currency speculation? (soapbox mode off)

If you're looking for some hedged ETF ideas, I use these ones (but your mileage may vary):

• Global equities: IGWD
• Bonds - US Govt, short duration index-linked: Ti5G, FLOS
• Bonds - US Govt, short duration: IBTG
• Bonds - Global Corporate, dollar denominated short duration: ZC1G
• Bonds - Global Corporate, dollar denominated intermediate duration: LQGH
• Bonds - Emerging Market, mixed short duration: UBXX

I also supplement these with some sort duration UK government gilts (GIL5) and sterling-denominated global corporate bonds (SUKC); pepped up for a bit of fun with some UK high yield (ZILK).

I also run an IHYP portfolio based on IVTs - but your question was about ETFs in particular

mjcross1 wrote: I also run an IHYP portfolio based on IVTs - but your question was about ETFs in particular

What type of investment is an IVT ?

I assume all the hedged ETfs mentioned are available on the H-L platform as they are not on other platforms such as iweb & Best Invest?

Thanks MartynC27

The standard answer to your question is to invest for total return and sell investments to generate income when that is necessary. That should give you a higher risk adjusted return, and increase the amount of income that you can withdraw without going bust. The first question you need to ask, is the level of risk you are willing to take. That determines the percentage of bonds that you should hold.

It is also worth noting that Japanese long term interest rates collapsed. Japanese investors would have made a big profit from their domestic bond holdings. The standard advice to invest in equities globally, and bonds in your own currency (they can be hedged overseas bonds) would have served them well.

What type of investment is an IVT ?

An IVT is an Investment Trust. Basically the same thing as a fund - but in the form of a public limited company. This type of investment is old as the hills, and has been around since the 1800's.

Historically IVTs were interesting to small investors because they were cheaper to hold and trade than shares; but with the advent of ETFs and broker price reductions that's no longer really the case. They do however fall into the same category as ETFs, in that H-L cap your annual fees for holding them are to £200pa irrespective of quantity.

Another reason they are interesting is that their management companies have certain freedoms that are not available to other funds - such as the ability to accumulate and hold cast reserves to tide them over less productive years; and the ability to trade in unlisted companies.

The main reason I am interested in the ones I use, however, is tas a source of healthy and reliable streams of dividend income. When I say 'reliable' the normal caveats apply of course - but some of these guys have track records that go back over a hundred years and during that time have never reduced their dividend despite two World Wars and the great depression. Personally I find that quite reassuring.

So to be clear, I don't hold these guys for capital growth... in fact I don't really care what the price per unit is doing - I just stick money in there, sit back and take the dividend at cost. i.e. the HYP strategy.

The specific IVT's I use are Henderson Far East (HFEL) and Merchants' Trust (MRCH), both of whom fall into the category of having extremely long and distinguished histories. They currently give me a dividend yields around the 5% mark. At the time of writing (Jan 2020) MRCH has gone on a bit of a rampage and is looking a bit pricey; but HFEL is relatively low priced at the moment due presumably to ongoing concerns over Hong Kong and US/China trade.

Another one to look at is the City of London Trust (CTY) but it's not currently one I hold.

I assume all the hedged ETfs mentioned are available on the H-L platform

Correct; and H-L can be a very cost efficient way to hold ETFs and IVTs due to the aforementioned £200pa cap. I'd be surprised if you can't find those ETFs I was talking about on other platforms too though - try looking them up on JustETF and then searching for them via the ISIN codes maybe?

Cheers, MC