Haphazard portfolio critique

[frugal90]

We are both retired teachers and as a result have reasonable final salary pensions and still have full state pensions to come.

My pension is £25k and my wife's is £20k.

We have jointly ISAs of about £471k and the portfolio has just sort of evolved and is all ITs

Our strategy is to take dividends when the ITs are within 5% of all time highs but to let them re-invest when they are lower than that.

We have no debt, frugal lifestyle but quite content.

There are only six ITs

FCIT 10%
BRWM 5%
MRCH 20%
UKW 5%
JGGI 38%
SAIN 22%

Our cash is now more than we need, £82k and we are planning to move £32k into the 23/24 ISAs soon.

If you were me and my wife, where would your ISA money go?

Would you add any ITs to the portfolio?

Plan is to draw more on the dividends about 5 years out from now??

Happy Easter, thanks

[seagles]

I would top up my renewables, either more UKW or another Renewable IT. My second one is TRIG, but may not fit your ideals. I, personally would steer clear of Growth IT's until there are signs of them "growing", mind you my FCIT have held their own, whilst both SMT and MNKS have proved a disappoinment (so far). Without knowing more about what you want to achieve and your ideals (longterm other than your income aims in 5 years) I would keep it simple.
Good luck.

[Dod101]

I would certainly be looking at Growth ITs to complement the income bias in the entire portfolio.

Assuming you want to stick to ITs for ease of admin, for steady middle of the road growth, chose from Finsbury Growth and Income, Caledonia, Alliance, or similar. You may feel uncomfortable with the much more volatile Scottish Mortgage or even Monks, but just leave these ticking over in the background and reinvest the modest dividends. Unlike seagles, I would be buying these now. No need to wait until they start growing again. Get in now. You cannot tell when they will take off again. These all emphasise growth rather than income but will complement the more income oriented ones you hold. Might be inclined to reduce JGGI a bit and add to UKW although I do not like many of the pure renewable investment companies/ITs. On fundraisers, they tend to dilute the small shareholder although it has to be said, they are usually good at producing reliable income.

Dod

[DrFfybes]

You don't say what your goal is, or why you might need more income in 5 years. Is this an important life change?

You have surplus income, £550k + in assets, and assuming there is a property as well then you are heading towards the current IHT limit and very unlikely to need it all for care fees. Will IHT become a liability, and are you young enough to still put £2880 into a SIPP in a possible IHT mitigation?

As for timing dividend reinvestment on market swings, "within 5% of all time high" can be a couple of days at the moment, certainly less than the time between the dividend arriving and the autoreinvest happening. You might find trying to time this quite difficult, and time consuming

For growth with no income you could use BRKB and hold until death to avoid CGT, so no need for a wrapper.

You are moving 32k of 82k into an ISA wrapper, why not the full £40k? Are you planning on moving some to premium bonds, or is keeping £50k as cash just a nice round number? As you both pay tax, Premium Bonds or a Cash ISA for the other £8k makes sense.

Are their children/grandchildren and do you want to help them - JISAs or Junior SIPPs?

As for which ITs, if I was any good at choosing those I'd be a lot better off

Pauk

[kempiejon]

I am increasingly of the opinion that a global tracker will be good enough. My current choice for a sheltered portfolio is vanguards accumulating offer VWRP the distributing version VWRL if held unsheltered. I fill my SIPP and ISA each year as I like to keep all my investments and cash away from the tax office's attention. So cash above day to day expenses I keep in premium bonds.

Our cash is now more than we need, £82k and we are planning to move £32k into the 23/24 ISAs soon.

Do you have some cash earmarked? The new year would offer a couple 2 x £20k ISAable and most brokers seem happy to allow cash balances. SIPP is a worthwhile shelter from the tax man too, non-earners can add £2880 and get 20% tax relief added.

No debt, final salary pensions, frugal lifestyle and nigh on half a mill to play with it might be time to start thinking about indulging yourself, though if naturally frugal that can be a wrench.

[monabri]

Check your state pension forecasts. Having been in a final salary scheme and not knowing your details, you might wish to consider buying class 3 National Insurance contributions. The effective yield can be "very attractive" and is government backed.

[Adamski]

Sounds like your got more than enough, so I'd personally get new cars, and plan some holidays.

If have children might want to gift some before next government (certainly under corbyn was going to be lifetime gift tax). Also talk of wealth tax, you could be in wealth tax terrority (who knows).

[dealtn]

Our cash is now more than we need, £82k and we are planning to move £32k into the 23/24 ISAs soon.

If you were me and my wife, where would your ISA money go?

Would you add any ITs to the portfolio?

Plan is to draw more on the dividends about 5 years out from now??

If I were you I doubt it would really matter. Sounds like you have more income and capital than you need. Well done and congratulations.

I would like to think I would be asking myself the question, why? What is important to me, and what might I be running out of time to do, and potentially later regret. £32k in which ISA looks like a relatively small and inconsequential decision given where you both are starting from.

[Darka]

To be honest, I would probably ISA half (or 2/3rds) of it (into IT's) and then use the rest for a nice holiday!

[monabri]

In addition to final salaries, the portfolio if bought 'today' would be generating £17k of tax free income. Having retired before state pension age, there is probably another £20k of income per annum still to come [ this of course is a guesstimate as I have no way of knowing when shares were bought and at what price!).



We don't know if there are kids with a possible IHT bill to face?

The puzzle is the line

"Plan is to draw more on the dividends about 5 years out from now?"

Why not do it now? In 5 years your income will be [£45k + increases in pensions of 5% pa? ] + [£17k from the portfolio + increases in divis] + [£20k (?) from state pensions + increases from triple lock], so maybe £82k+++ p.a. ? Why wait for 5 years...you might be brown bread!

[Darka]

Why not do it now? In 5 years your income will be [£45k + increases in pensions of 5% pa? ] + [£17k from the portfolio + increases in divis] + [£20k (?) from state pensions + increases from triple lock], so maybe £82k+++ p.a. ? Why wait for 5 years...you might be brown bread!

Based on Monabri's breakdown, it makes no sense (to me) to invest further.

With index linked DB and state pensions + the income from the IT portfolio, it's time to spend that excess cash instead.
As a retiree, you don't need to continue to grow your wealth forever, spend some of it whilst you can before it's too late.

My wife and I are off to Arizona later in the year, we booked the much more expensive BA premium economy seats for comfort as it's long haul, and can't wait!

I'm 53 (retired 17 months ago) and we have enough income, when my SIPP becomes available, we'll have quite a bit more and we wanted to treat ourselves whilst we are able to enjoy it.

Can't take it with you.

[frugal90]

Amazing response.

I joined this forum a number of years ago, but didn't start posting anything.

I guess a bit more context needed.

We have two properties, one in the north east of Scotland a beautiful area, which we love. The house is too big really for the two of us really, but we love the garden. Polytunnel, fruit cage, raised beds etc we enjoy the graft tbh. We also have a 2 bed apartment in North Cyprus, where go to in March/April and Oct/Nov. Sort of bringing the summer forward and also lengthening the summer. That along with cycle touring/trekking keeps us quite content.

We were both raised to be very careful with money and the move from accumulation to de-accumulation is indeed more difficult than we imagined.

I am 61 and my wife is 55, she doesn't yet have her teachers pension but is drawing down on her sipp until 60, the annual amounts she'll take are similar to what her teachers pension will be.

So we still have another lump sum to come from her teachers pension, about £60k but that will rise with inflation over the next 5 years.

I guess our aims are to be happy, which we are.

Staying in posh hotels and meals out doesn't really do it for us I am afraid. Love to cook, even make wine. Never buy Costa coffee as I'd rather take a flask!

Thanks for all the suggestions, I have read them all and there is some great advice.

We are making sure we max out our state pensions, that is in hand.

Anyone else struggled with de-accumulation?

I once watched a programme when I was a kid about an old lady who died when she couldn't afford to put the heating on, it was the early 1970's. It stuck with me and I can remember the program clearly today.

Keep the portfolio and lifecadvicevcoming, this is a great forum.

[tjh290633]

We are both retired teachers and as a result have reasonable final salary pensions and still have full state pensions to come.

My pension is £25k and my wife's is £20k.

We have jointly ISAs of about £471k and the portfolio has just sort of evolved and is all ITs

Our strategy is to take dividends when the ITs are within 5% of all time highs but to let them re-invest when they are lower than that.

We have no debt, frugal lifestyle but quite content.

There are only six ITs

FCIT 10%
BRWM 5%
MRCH 20%
UKW 5%
JGGI 38%
SAIN 22%

Our cash is now more than we need, £82k and we are planning to move £32k into the 23/24 ISAs soon.

If you were me and my wife, where would your ISA money go?

Would you add any ITs to the portfolio?

Plan is to draw more on the dividends about 5 years out from now??

Happy Easter, thanks

My policy would be to stick to this lot but rebalance it some. Do not necessarily reinvest dividends whence they come. Bring the lower weighted shares up a bit.

TJH

[DrFfybes]

Anyone else struggled with de-accumulation?

I/we did. I'm more over it now, MrsF not so much. One 'tool' was to set up a holding of accumulation fund(s) that auto sells a fixed sum each month and puts it in the bank. After a year I managed to stop looking at the value every week or 2, but it will make CGT calcs interesting if it ever comes to that.

There are some posts about this on the FIRE board, a better place to comtinue this line of thought.

Paul

[frugal90]

Thanks Paul

[monabri]

Anyone else struggled with de-accumulation?

I/we did. I'm more over it now, MrsF not so much. One 'tool' was to set up a holding of accumulation fund(s) that auto sells a fixed sum each month and puts it in the bank. After a year I managed to stop looking at the value every week or 2, but it will make CGT calcs interesting if it ever comes to that.

There are some posts about this on the FIRE board, a better place to comtinue this line of thought.

Paul

Yep..and even after 10 years of retirement fast approaching it is difficult. Mrs M is the same..we are quite frugal and live well below our means but we do have the odd flurry when we splash out on something we want - we're not monks!

p.s. I see UKW being a higher risk than the collective funds in your list. I would leave it where it is and not top up.It is a odd choice in among the others..was it a flavour of the month pick? (those net margins of 90+% are a juicy Labour tax treat). I would top up elsewhere and thus dilute it's significance.

[monabri]

I've entered your funds into the Morninstar X Ray tool. The "X ray analysis" indicates a strong bias to Large Cap shares and a small allocation to mid and smaller companies. Thus you might wish to look at ITs that invest in these areas? A Global Small Cap IT fund?

With the current portfolio there is a degree of stock overlap (ie a stock is held in more than one IT).

Broadly, the portfolio is invested:

North America 46%
Latin America 1.16%
UK 24.8%
Europe 17.2%
Africa 0.22%
Japan 2.43%
Australasia 2.21%
Asia developed 3.03%
Asia emerging 2.58%
Other (not classified) ..to balance

So, pretty much the developed World is covered but perhaps look for a fund that covers elesewhere (Schroders Oriental Income IT - "SOI" ? or something along those lines).

https://www.fundslibrary.co.uk/FundsLib ... j2f98a&r=1

source: https://www.morningstar.co.uk/uk/Portfo ... /xray.aspx

[frugal90]

. " see UKW being a higher risk than the collective funds in your list. I would leave it where it is and not top up.It is a odd choice in among the others..was it a flavour of the month pick? (those net margins of 90+% are a juicy Labour tax treat). I would top up elsewhere and thus dilute it's significance."

Thanks so much for the work you have done here, we were considering widening the scope of the portfolio, so something like SOI might site well. I am aware of overlap as well.

Didn't really understand what you meant about UKW.
We switched from BERI to UKW which I had been watching for a while. It had gone to a discount.

Can you elaborate your point you made here, which I didn't really understand

"those net margins of 90+% are a juicy Labour tax treat). I would top up elsewhere and thus dilute it's"



https://www.sharesmagazine.co.uk/articl ... ind%20(UKW)%20is,recently%20by%20strong%20power%20prices.

[monabri]

. " see UKW being a higher risk than the collective funds in your list. I would leave it where it is and not top up.It is a odd choice in among the others..was it a flavour of the month pick? (those net margins of 90+% are a juicy Labour tax treat). I would top up elsewhere and thus dilute it's significance."

Thanks so much for the work you have done here, we were considering widening the scope of the portfolio, so something like SOI might site well. I am aware of overlap as well.

Didn't really understand what you meant about UKW.
We switched from BERI to UKW which I had been watching for a while. It had gone to a discount.

Can you elaborate your point you made here, which I didn't really understand

"those net margins of 90+% are a juicy Labour tax treat). I would top up elsewhere and thus dilute it's"



https://www.sharesmagazine.co.uk/articl ... ind%20(UKW)%20is,recently%20by%20strong%20power%20prices.

The comment was directed at a political risk/threat. I was commenting on a possible windfall tax IF Labour were to win the next General Election. UKW are 'flying high' (look at the net margin..wow, 4x the likes of Diageo or ~8x ULVR !). A Labour government might decide to 'interfere' and introduce further windfall taxes. The view they might take might be "why should these rich shareholders make lots of money whilst hard working taxpayers are struggling?".

The other comment was that UKW is an individual company whereas you're other investments are collectives - hence the single point risk with UKW.

[frugal90]

I understand now. Yes, I guess there is a risk, but it only makes up about 5% of our portfolio at the moment, so will watch and monitor.

I think labour will probably lead the next government.

They have a lot of talk of developing and investment in the green economy, so will be interesting to see what actually happens.