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Income Portfolio
Tyrion Lannister
Posted: 19 June 2017 23:36:57(UTC)
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Big boy;48029 wrote:
Do you know the portfolio yield and how exs are split so we can understand the dynamics of fund. We can then make better comparisons between each fund. Not sure but think the "ongoing charge" is 1.61% so they need portfolio yield of 4.61% if charges go to the revenue a/c.


Most income funds deduct charges from capital and vice versa for growth funds. It's largely irrelevant to me though, HL take charges into account for performance data and the only 2 numbers I'm bothered about are income and total return.
john_r
Posted: 20 June 2017 09:45:16(UTC)
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Tyrion Lannister;48067 wrote:
john_r;48038 wrote:
Tyrion Lannister;47991 wrote:

....I did look at ITs but concluded that none of them were better than the above....


1Y 3Y 5Y Yld
Margetts Ardevora Inc 18.3, 28.3, 103.2, Yld 4.00%
Finsburyt Inc & Growth IT 33.1, 51.1, 147.5, Yld 1.88%
Source: Trustnet


I own Lindsell Train UK Equity, the Finsbury IT looks very similar to this so no point holding both. Would you agree?
I'm starting to rethink my whole portfolio thanks to comments on here, starting with a fundamental question - is thinking about growth and income separately the right way to go about portfolio construction?
My initial reasoning was that just taking the natural yield when I retire would be nice and easy, but that could be 10 years away.



No, there's nothing special about FGT it was just the first one that came to my head. There are many other IT's out there outperforming M'getts Ardevora.
My own experiences have led me a different way. The only open ended fund I hold is Fundsmith, the balance being IT's or individual equities. For the last six or seven years my portfolio has largely been driven by growth opportunities not income - though in my Sipp I do try to moderate my eagerness.

My attraction to growth is based on cheap money. We can all see the effect of cheap money on house prices and equally for any well run company cheap borrowing has benefited their situation.
Across the pond the US continues to rein in the cheap dollar and sadly for investors before long the UK will be following their lead and hey presto, the current gravy train will dry up. What will be outcome is anybody's guess but for me, selective company assets are still the best way going forward as long lasting inflationary fears abound.
Tongue in cheek, of course this may well all pale into insignificance against coming opportunities presented by Brexit.
I will keep looking but in the meantime I'll continue with gravy train.

disclaimer : I do hold a 'fixed' cash reserve solely for doomsday protection.

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Tyrion Lannister on 20/06/2017(UTC)
Alan Selwood
Posted: 20 June 2017 13:08:07(UTC)
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I too only hold Fundsmith among funds, plus several ITs, plus quite a number of individual equities, mainly drawn from the list of profitable AIM stocks with high returns on equity.
Reasoning: Fundsmith has been my most profitable non-specialist collective holding, so until it behaves otherwise, it will remain as my megacap main holding.
ITs held are to cover areas where I have no stockpicking skills and knowledge, such as overseas companies and speciality sectors.
Individual equities are largely for a combination of high-growth prospects, IHT saving potential and freedom from stamp duty costs and management charges.
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Tyrion Lannister on 20/06/2017(UTC), dlp6666 on 26/06/2017(UTC), c brown on 27/06/2017(UTC)
North Star
Posted: 20 June 2017 15:32:49(UTC)
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I found your post interesting as I have a upcoming similar situation.

My portfolio consists of 80% Global funds which is a 50/50 mixture of IT's and unit trusts.

I follow Ian Cowie in the Sunday Times and like Ian my preference is for IT's as they have reserves that see them through bad times which will come at some point of time. Charges on income units are also very high in my opinion compared with IT's and in bad times IT's dont have to sell unlike units.

The income unit I do have a preference for is Wise Income, They seem to have good sense in long term stock picking and value situations.
Like Ian Cowie I dont go for tobacco shares although I can understand their dividends are high but I would be profiting from someones elses addiction to the weed.
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Tyrion Lannister on 20/06/2017(UTC)
Tyrion Lannister
Posted: 20 June 2017 15:54:04(UTC)
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Alan, John, your comments re Fundsmith being the only unit trust you hold are interesting.

I too hold Fundsmith, and 2 other funds which will stay in my portfolio for the foreseeable future - Lindsell Train UK Equity and Old Mutual UK mid cap. I can't see any ITs to touch these, although Lindsell Train's IT would be a natural if it wasn't for the massive premium.
Tyrion Lannister
Posted: 20 June 2017 15:58:30(UTC)
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North Star;48091 wrote:
I found your post interesting as I have a upcoming similar situation.

My portfolio consists of 80% Global funds which is a 50/50 mixture of IT's and unit trusts.

I follow Ian Cowie in the Sunday Times and like Ian my preference is for IT's as they have reserves that see them through bad times which will come at some point of time. Charges on income units are also very high in my opinion compared with IT's and in bad times IT's dont have to sell unlike units.

The income unit I do have a preference for is Wise Income, They seem to have good sense in long term stock picking and value situations.
Like Ian Cowie I dont go for tobacco shares although I can understand their dividends are high but I would be profiting from someones elses addiction to the weed.


Assuming you mean Wise Evenlode Income, I've come to the conclusion that this is too good to leave out of portfolio.
North Star
Posted: 20 June 2017 16:44:13(UTC)
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There are two TB Wise Income and Evenlode. The Evenlode is excellent but too UK focused for me so I go go for the TB Wise Income which is mixed asset and Global.
The TB Wise Income had a rough patch as 30% are with small companies but it's come very good recenctly. I prefered this to Marlborough Multi-Cap Income which I sold.

My worry is Sterling and whilst the FTSE is a fairly international mix, the worlds a big place and Schroder Oriental Income IT has done very well for me along with Newton Global Income UT. Australia hasn't been in recession for the last 20 years or so.
My instinct for protection against falls in Sterling worked for me last year with an overall performance of +35% which is reasonable considering I had a fair mix in there of smaller company IT's and units.
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Tyrion Lannister on 20/06/2017(UTC)
Joe Soap
Posted: 21 June 2017 01:52:09(UTC)
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Evenlode Income is an outstandingly good fund. I recall it being rather like Fundsmith though, so I didn't buy any Evenlode even though I agree what great fund it is. Do I have the wrong impression?
North Star
Posted: 21 June 2017 06:16:18(UTC)
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Joe Soap;48118 wrote:
Evenlode Income is an outstandingly good fund. I recall it being rather like Fundsmith though, so I didn't buy any Evenlode even though I agree what great fund it is. Do I have the wrong impression?


Coming from a small business background I have natural affinity for small mid-cap stocks to give good growth in my portfolio. Possibly I have been too biased in that direction and not included the Evenlode which I think I will do with future investments.
I receive the Evenlode & Wise quarterly? reports and Tony Yarrow is a on my wavelength so these funds will form a good core of my investments.
Also agree with comments about the Chelverton UK Income which I omitted from my earlier posts.
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Joe Soap on 21/06/2017(UTC), dlp6666 on 26/06/2017(UTC)
King Lodos
Posted: 21 June 2017 06:21:42(UTC)
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But if you compare Evenlode's returns to Fundsmith's – relating to my comments yesterday that income is a bit of an illusion – you see Fundsmith's returned quite a bit more, in very similar companies, because it's focused on the profitability of the businesses, without having to worry too much about income.

Of course part of it will be currency exposure – but I think even taken into account, Fundsmith's so far demonstrated a principle I tend to think will hold true .. But I like the companies Evenlode invests in a lot.
Joe Soap
Posted: 21 June 2017 07:40:22(UTC)
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King Lodos;48121 wrote:
But if you compare Evenlode's returns to Fundsmith's – relating to my comments yesterday that income is a bit of an illusion – you see Fundsmith's returned quite a bit more, in very similar companies, because it's focused on the profitability of the businesses, without having to worry too much about income.

Of course part of it will be currency exposure – but I think even taken into account, Fundsmith's so far demonstrated a principle I tend to think will hold true .. But I like the companies Evenlode invests in a lot.

Thanks, this one of Terry Smith's hobby horses. It should be more profitable for the company to invest the cash back into its own business and grow value much better than if it was paid out as a dividend. Perhaps good old Tel has a point eh?
King Lodos
Posted: 21 June 2017 08:07:44(UTC)
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Joe Soap;48124 wrote:
Thanks, this one of Terry Smith's hobby horses. It should be more profitable for the company to invest the cash back into its own business and grow value much better than if it was paid out as a dividend. Perhaps good old Tel has a point eh?


I *think* so .. The data seems to suggest that over 100 years of market returns, dividends have compounded greater returns than money businesses have reinvested in themselves .. Perhaps no surprise, as most businesses fail.

But I think if you're specifically investing in very safe businesses, which have been able to reinvest capital at a high rate of return, Smith's logic (and Joel Greenblatt's and Charlie Munger's, etc.) is probably one of the safest bets in investing.



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Joe Soap on 28/06/2017(UTC)
TJL
Posted: 25 June 2017 14:20:18(UTC)
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In relation to platform charges -
http://www.telegraph.co....ges-erode-money-stealth/
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c brown on 27/06/2017(UTC)
Tim D
Posted: 26 June 2017 12:15:28(UTC)
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I helped out a relative invest a not-dissimilar amount for an income portfolio last year (not long after the brexit referendum, which made it a somewhat "exciting" period to be moving funds around). Their main requirements were: reasonably smooth sustainable monthly income and ultra-low-maintenance required (a "buy and forget" portfolio); they also quite like multi-asset "balanced" funds over all-equity ones.

They ended up making equal investments in:

  • Fidelity MoneyBuilder Balanced Inc (FICNRM)
  • Artemis Monthly Distribution I Inc (PKMONR)
  • Kames Diversified Monthly Income B Inc (K1DVCM)
  • L&G Managed Monthly Income I Dist (LGMMII) - this one is just a bond fund
  • Aviva target income 2 (MFAABA) - unusual income oriented absolute return fund
  • And another tranche split between property fund/trust: Kames Property Income : (K1AAAD) and F&C Commercial Property (FCPT).


All the above pay interest/dividends monthly, which their platform aggregates and pays to their bank account once a month.

So far they seem very happy with it. Aggregate income has been smooth enough with no "lean months". The property holdings in particular have done very well (bought in the shadow of brexit when many funds had outflow stemming measures in place and FCP was on a discount). All the rest are up a little too (despite all the yield they're throwing off), excepting the Avivia absolute return which lurched downwards soon after purchase; personally I suspect their 4% target is a bit ambitious in the current environment.

Their portfolio does also have a fair number of random looking all-equity funds in it (so it's not quite as high a proportion in bonds/property as the above list would suggest) but paying more infrequent divis... for now the idea is to retain that cash in the dealing account and periodically use it (and maybe some CGT-compatible amount of growth too) to grow the "income engines" listed above, on the assumption their growth (and income growth) will likely lag inflation without some sort of topping up (so this aspect isn't quite so "buy and forget").

BTW, for anyone attempting to use a collection of quarterly/biannually-paying trusts to obtain a smooth income, there's a very nice list consolidating divi payment months at: http://www.thisismoney.c...rterly-bi-annually.html (2015 article so yields given may not be too accurate).
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Keith Cobby on 26/06/2017(UTC), dlp6666 on 26/06/2017(UTC)
Keith Cobby
Posted: 26 June 2017 12:26:03(UTC)
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Helpful post from Tim. Alliance Trust aggregate income and pay on a specific day each month. I think their cut off is the fifth day of the month for income received. Useful to know which month funds pay dividends although some may pay on the first day or the last (or in between!).
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