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"Investors should choose: dividends or diversification

Wider investment strategy discussions not dealt with elsewhere
Bouleversee
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"Investors should choose: dividends or diversification

#78857

Postby Bouleversee » September 3rd, 2017, 1:52 pm

An article by Merryn Somerset Webb in yesterday's FT Money articulates some of the things I have been suggesting in various posts which should probably have been on here. It's worth a read and a bit of thought, bearing in mind also the tax changes which are in the pipeline. I'll post a link but you may not be able to access without subscribing:

https://www.ft.com/content/d276677c-8e4 ... 6f43c5825d

They appear to have changed the title of the article on the website to "Have Equity Income Funds Had Their Day?" and I had to get this via the webchat.
The same principles apply to individual shares. You may disagree, of course.

Alaric
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Re: "Investors should choose: dividends or diversification

#78861

Postby Alaric » September 3rd, 2017, 2:09 pm

Bouleversee wrote: I'll post a link but you may not be able to access without subscribing:


For FT stuff, a Google search of the article title usually seems to work.

In this case a search for

Financial Times Have equity income funds had their day?


It's an interesting point about concentration of risk, that high yielding stocks are concentrated on a smaller number of companies in a smaller number of sectors. It's a risk that would also apply if you were relying on income from a FTSE 100 tracker.

For wealth outside of an ISA or SIPP, the probable restriction of tax free dividends to £ 2,000 a year may reduce the popularity of a "high yield" approach to investment in favour of one that attempts to harvest the annual capital gains exemption.

YeeWo
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Re: "Investors should choose: dividends or diversification

#78862

Postby YeeWo » September 3rd, 2017, 2:17 pm

I'm an admirer of Merryn and read this article last night. Clearly chasing Yield is pushing Certain Stocks into bubble territory and she is highlighting this. The 1952 Glaxo stats are amazing, that said who'd of known then?(!). Conclusion Diversify and don't Just chase Yield. A blended approach, Capital Gains aren't per-se Bad! :o

Bouleversee
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Re: "Investors should choose: dividends or diversification

#78878

Postby Bouleversee » September 3rd, 2017, 3:45 pm

Alaric wrote:
Bouleversee wrote: I'll post a link but you may not be able to access without subscribing:


For FT stuff, a Google search of the article title usually seems to work.

In this case a search for

Financial Times Have equity income funds had their day?


It's an interesting point about concentration of risk, that high yielding stocks are concentrated on a smaller number of companies in a smaller number of sectors. It's a risk that would also apply if you were relying on income from a FTSE 100 tracker.

For wealth outside of an ISA or SIPP, the probable restriction of tax free dividends to £ 2,000 a year may reduce the popularity of a "high yield" approach to investment in favour of one that attempts to harvest the annual capital gains exemption.


I did a Google search but was searching for the title used in my printed FT; as I said, they had changed it on the website version.

monabri
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Re: "Investors should choose: dividends or diversification

#78897

Postby monabri » September 3rd, 2017, 4:50 pm

"In the 1950s, the point of investing.... “to provide assets to match as closely as possible the liabilities stretching years into the future over the lifetime of individual policyholders”.

That would be about 11 (?) years of retirement then, before most of the retirees dropped dead! (the ones that actually made it to retirement).


The following report suggest 11 years for retirees in 1950s.....but I doubt it was that good for those employed in manual labour.

http://blogs.lse.ac.uk/politicsandpolic ... ews-story/

GoSeigen
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Re: "Investors should choose: dividends or diversification

#78936

Postby GoSeigen » September 3rd, 2017, 7:06 pm

Bouleversee wrote:An article by Merryn Somerset Webb in yesterday's FT Money articulates some of the things I have been suggesting in various posts which should probably have been on here.


This is a drum some of us have been beating a long long time. (And proved wrong so far????)


GS

tieresias
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Re: "Investors should choose: dividends or diversification

#80897

Postby tieresias » September 13th, 2017, 4:56 pm

At the end of the article, she mentions "the devastating effect the dividend controls of the 1970s had on the market".

I've tried searching, but I didn't find anything relevant. Does anyone know what she is referring to?

TIA

Bouleversee
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Re: "Investors should choose: dividends or diversification

#80948

Postby Bouleversee » September 13th, 2017, 9:19 pm

1nv35t wrote:
tieresias wrote:At the end of the article, she mentions "the devastating effect the dividend controls of the 1970s had on the market".

I've tried searching, but I didn't find anything relevant. Does anyone know what she is referring to?

TIA

I've just skimmed the thread and not read the article, but that sounds like the likes of the 136% tax rate applied by Roy Jenkins (then Labour) in 1968 and the broader mid 1960's - mid 1970's high tax rate supplemented with a further 15% unearned income (i.e. dividends/bond interest) additional taxation. At such levels the perceived treasury take is nowhere near the mathematical anticipated (Corbynomics) and instead promotes outflows/economic decline/inaction. The Beatles sang 'Taxman' 19 for you 1 for me in reflection of their 95% tax rate, others such as David Bowie emigrated (Switzerland IIRC) ... a reflection of the wider situation. By the mid 1970's many were regularly eating their evening meal by candlelight (no mains power), were lucky to be working three days a week, and had mountains of uncollected rubbish on street corners. 1973 and 1974 saw the market down around -33% one year, -50% the next, whilst inflation ran up something like 20% one year, 25% the next (in a couple of years the markets had in effect lost you 80% of prior value, assuming you weren't drawing a income/spending the dividends ... excluding taxes (including taxes and subject to your personal tax rate some lost everything across a relatively short period)).


Ah yes, I remember it well. (Gigi)

Alaric
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Re: "Investors should choose: dividends or diversification

#80972

Postby Alaric » September 13th, 2017, 11:37 pm

tieresias wrote:At the end of the article, she mentions "the devastating effect the dividend controls of the 1970s had on the market".


There were controls on dividend increases, but I thought that started in the 1960s. If you have a "Prices and Incomes" policy as both the governments of Harold Wilson and Ted Heath attempted, dividends are a reasonable inclusion, for political reasons if not economic.

Over the past 10 years, holders of shares with high dividends have probably done better than public sector employees in terms of after tax income.

tjh290633
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Re: "Investors should choose: dividends or diversification

#81001

Postby tjh290633 » September 14th, 2017, 8:55 am

I have a vague recollection of receiving a large, possibly 1 for 1, scrip issue from one of my shares, so that they could circumvent the restrictions on dividend increases.

It could have been Babcock and Wilcox, but my records from the time before the FKI takeover are hidden away somewhere.

TJH

DiamondEcho
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Re: "Investors should choose: dividends or diversification

#81403

Postby DiamondEcho » September 15th, 2017, 8:05 pm

Bouleversee wrote:Ah yes, I remember it well. (Gigi)


Me too, what an utterly miserable time. Doing homework by paraffin lamp and believing we were about to be nuked by the Russians.
Then Vietnam and Cambodia, no wonder the punk music movement found a willing audience, it fitted with the nihilism of the time.

Dod1010
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Re: "Investors should choose: dividends or diversification

#81417

Postby Dod1010 » September 15th, 2017, 10:18 pm

Ha Ha I was another exile by that time. I have not been lucky all my life but I decided in November 1967 (at the time of H Wilson's devaluation of sterling, the famous 'pound in your pocket' comment) to seek my future abroad and was in Hong Kong by the end of March 1968. I never looked back and was there until June 1991 so I know nothing about what our boss called the 'English disease' which lasted more or less until Mrs Thatcher appeared on the scene as far as I know.

Dod


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