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Income Portfolio
Tyrion Lannister
Posted: 16 June 2017 16:49:24(UTC)
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I’m looking to invest £200K in income funds. In an ideal world I’d choose as few funds as possible but am thinking about investing the money in 10 separate funds. Partly because I’m not sure which ones to go with but also to spread the income out rather than having it paid in quarterly chunks. Also, the ones I’ve chosen mostly have different investment strategies.

At present I’m going for 4 global funds and 6 UK funds into which I’d put £20K each:

Newton Global Income
Threadneedle Global Equity Income
Fidelity Global Enhanced Income
Liontrust Global Income

Royal London Sterling Extra Yield Bond
CF Miton UK Multi Cap Income
J O Hambro UK Equity Income
Majedie UK Income
CF Woodford Income Focus
Margetts Ardevora UK Income

These are all open ended funds, I did look at ITs but concluded that none of them were better than the above.

Also, with the exception of Royal London, they are all equity funds, I don’t have any faith in the prospects for bonds in the near future. Also, I’m already investing in Vanguard Investment Grade Bond Index.

I’m aiming for an overall income of no less than 4% with a good total return.

I’d be grateful for any ideas or comments.
Mickey
Posted: 16 June 2017 17:28:32(UTC)
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Just in case you aren't aware of it here is a link to the 'White List' which is a long running study of equity income funds. It might be of use, it comes out every six months so a new one is due next month I believe.
http://www.whitelist.co.uk/income-study/

HTH
12 users thanked Mickey for this post.
Tyrion Lannister on 16/06/2017(UTC), c brown on 16/06/2017(UTC), dyfed on 16/06/2017(UTC), Mike L on 16/06/2017(UTC), Sara G on 17/06/2017(UTC), S Dobbo on 18/06/2017(UTC), Peter Sm on 18/06/2017(UTC), Jim S on 19/06/2017(UTC), Geoffrey Walter on 19/06/2017(UTC), dlp6666 on 21/06/2017(UTC), Guest on 22/06/2017(UTC), Tim D on 26/06/2017(UTC)
Tyrion Lannister
Posted: 16 June 2017 17:45:36(UTC)
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Mickey;47992 wrote:
Just in case you aren't aware of it here is a link to the 'White List' which is a long running study of equity income funds. It might be of use, it comes out every six months so a new one is due next month I believe.
http://www.whitelist.co.uk/income-study/

HTH


Thank's Mickey, I didn't know about this and it looks very useful.

It only covers UK equities of course, but of the 4 in my list, 3 are on the white list so I'm sticking with those. Woodford's fund has only recently launched so it wouldn't be included anyway which leaves the Margetts fund which is on the grey list. I'm going to have a close look at the Schroder income Maximiser as an alternative.
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Mickey on 16/06/2017(UTC)
TJL
Posted: 16 June 2017 18:10:56(UTC)
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I appreciate that you have decided against investment trusts, but depending on which platform you are with, have you thought about the charges you are going to pay if you stick with funds?
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Tyrion Lannister on 16/06/2017(UTC), Guest on 18/06/2017(UTC), dlp6666 on 21/06/2017(UTC)
Tyrion Lannister
Posted: 16 June 2017 19:32:46(UTC)
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TJL;47994 wrote:
I appreciate that you have decided against investment trusts, but depending on which platform you are with, have you thought about the charges you are going to pay if you stick with funds?


It's a good point. I've nothing against Investment trusts per say, I invest in them for growth. It's purely about performance, the difference in dividends alone easily covers the platform charge.
King Lodos
Posted: 16 June 2017 20:49:15(UTC)
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I think the portfolio of GAM Star Credit Opportunities is worth a look.

Perpetual bonds sit sort of between stocks and corporate bonds – average yield over 5%, average credit rating BB+, duration 7 years.

It's like a short-term investment grade fund with high yield yields – many of which are inflation linked – and it's beaten then FTSE World's return so far .. Must admit I'm not experienced enough in this part of the market to know what the problems are, but I think there are quality perpetuals and preferred shares that look like actual bargains next to stocks and bonds today – possibly because everyone's buying ETFs and trackers, and these are almost alternative investments.

https://www.gam.com/media/123465/sesst-r.pdf
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Tyrion Lannister on 16/06/2017(UTC), Jon Snow on 16/06/2017(UTC), Jim S on 17/06/2017(UTC), dlp6666 on 21/06/2017(UTC)
Jon Snow
Posted: 17 June 2017 00:11:35(UTC)
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King Lodos;47996 wrote:
I think the portfolio of GAM Star Credit Opportunities is worth a look.

Perpetual bonds sit sort of between stocks and corporate bonds – average yield over 5%, average credit rating BB+, duration 7 years.

It's like a short-term investment grade fund with high yield yields – many of which are inflation linked – and it's beaten then FTSE World's return so far .. Must admit I'm not experienced enough in this part of the market to know what the problems are, but I think there are quality perpetuals and preferred shares that look like actual bargains next to stocks and bonds today – possibly because everyone's buying ETFs and trackers, and these are almost alternative investments.

https://www.gam.com/media/123465/sesst-r.pdf


Agree it looks interesting in the "inflationary" environment in the UK at present. For me a track record of 3 years is a bit too short.

It goes XD on 1 July 2017 and it pays out annually, so I'd expect at least a 4% (the yield on the HL website) correction.

I've been toasted for saying this before, Liontrust Monthly Income Bond, tucked away in my SIPP.



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King Lodos on 17/06/2017(UTC)
Joe Soap
Posted: 17 June 2017 01:47:56(UTC)
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OP - To me, the two obvious funds missing from your list are -

Trojan Income (fantastic long term fund, always delivers, currently I hold)
Chelverton Income (top tier, smaller companies focused, keeps delivering, I hold)

Regarding White List, indeed is very useful but some top "income" funds are not in there on fairly technical grounds regarding yield. But on total return are high performers.
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Tyrion Lannister on 17/06/2017(UTC)
Tyrion Lannister
Posted: 17 June 2017 08:32:06(UTC)
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Joe Soap;47999 wrote:
OP - To me, the two obvious funds missing from your list are -

Trojan Income (fantastic long term fund, always delivers, currently I hold)
Chelverton Income (top tier, smaller companies focused, keeps delivering, I hold)

Regarding White List, indeed is very useful but some top "income" funds are not in there on fairly technical grounds regarding yield. But on total return are high performers.


Thanks Joe, Trojan Income is worth a closer look.

Another solid fund not in the White List is Evenlode, it's dividend (currently 3.2%) is on the low side so I discounted it.

I looked long and hard at Chelverton Income.

I currently hold Chelverton UK Equity Growth, another solid performer and I've decided to swap this for SDV, that's the reason Chelverton UK Equity Income is missing from my list.
Joe Soap
Posted: 18 June 2017 01:37:04(UTC)
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I couldn't for the life of me think of Evenlode yesterday! Another great fund not in the official income sector.

One last comment, though I do buy income funds, I also buy growth funds too. I never rule out a fund because income is too low/too high or anything like that. I look at the total return. I don't care whether my portfolio increases in value by income or by growth. I just want around 4 or 5% return over the long term. I tend to buy income fund accumulation units for that very reason.

PS - Take a look at Threadneedle Alpha Income too.
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Tyrion Lannister on 19/06/2017(UTC)
S Dobbo
Posted: 18 June 2017 06:26:06(UTC)
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Joe Soap;48003 wrote:
I don't care whether my portfolio increases in value by income or by growth. I just want around 4 or 5% return over the long term. I tend to buy income fund accumulation units for that very reason.


If you're buying in a trading account rather than an ISA or SIPP you may be better off buying income units and reinvesting dividends rather than accumulation units. This helps with CGT calculations and not having to pay CGT on dividends.
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c brown on 27/06/2017(UTC)
Betty G
Posted: 18 June 2017 08:10:19(UTC)
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Tyrion Lannister;47991 wrote:
I’m looking to invest £200K in income funds. In an ideal world I’d choose as few funds as possible but am thinking about investing the money in 10 separate funds. Partly because I’m not sure which ones to go with but also to spread the income out rather than having it paid in quarterly chunks. Also, the ones I’ve chosen mostly have different investment strategies.

At present I’m going for 4 global funds and 6 UK funds into which I’d put £20K each:

Newton Global Income
Threadneedle Global Equity Income
Fidelity Global Enhanced Income
Liontrust Global Income

Royal London Sterling Extra Yield Bond
CF Miton UK Multi Cap Income
J O Hambro UK Equity Income
Majedie UK Income
CF Woodford Income Focus
Margetts Ardevora UK Income

These are all open ended funds, I did look at ITs but concluded that none of them were better than the above.

Also, with the exception of Royal London, they are all equity funds, I don’t have any faith in the prospects for bonds in the near future. Also, I’m already investing in Vanguard Investment Grade Bond Index.

I’m aiming for an overall income of no less than 4% with a good total return

I’d be grateful for any ideas or comments.



You have chosen a selection of funds which have performed reasonably well over a relative short period of time. Your choices are pretty much the same as I would have advised to a client, (although they are not where I invest my money).
Your UK funds contain in excess of 220 stocks, so in effect, you've bought a very expensive tracker.You should underperform the sector by the amount that you pay in performance, management and platform fees.
If your desired route is to invest this way, you could always tap into HL's (not insignificant) research budget for free and take a look at their multi manager income constituents, I'm sure they're equally as qualified at choosing funds as some others.
3 users thanked Betty G for this post.
Tyrion Lannister on 18/06/2017(UTC), dlp6666 on 21/06/2017(UTC), Guest on 22/06/2017(UTC)
JohnM
Posted: 18 June 2017 10:48:08(UTC)
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Tyrion

Re the Schroder Income Maximiser fund, be aware that to gain its extra income it sells call options, which potentially means you are giving away some of the upside if some of the shares rally quite well.
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Tyrion Lannister on 18/06/2017(UTC)
TJL
Posted: 18 June 2017 15:05:43(UTC)
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I was (partially) trying to make the same point as Betty G (in relation to 'performance, management and platform fees').
I started out in about 1997 by investing in funds, but after many years, became aware of the issue of fees (as did many others), and after doing some rough calculations (because what you pay is never very obvious) discovered I was paying an awful lot.
I now invest almost completely in investment trusts, and investments trusts which are highly rated and regarded, pay a good dividend and have low charges are my preferred choice (i.e. CTY).
But good luck, we must all make our own decisions.
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Guest on 22/06/2017(UTC), c brown on 27/06/2017(UTC)
Tyrion Lannister
Posted: 18 June 2017 16:26:27(UTC)
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Betty G;48010 wrote:
Tyrion Lannister;47991 wrote:
I’m looking to invest £200K in income funds. In an ideal world I’d choose as few funds as possible but am thinking about investing the money in 10 separate funds. Partly because I’m not sure which ones to go with but also to spread the income out rather than having it paid in quarterly chunks. Also, the ones I’ve chosen mostly have different investment strategies.

At present I’m going for 4 global funds and 6 UK funds into which I’d put £20K each:

Newton Global Income
Threadneedle Global Equity Income
Fidelity Global Enhanced Income
Liontrust Global Income

Royal London Sterling Extra Yield Bond
CF Miton UK Multi Cap Income
J O Hambro UK Equity Income
Majedie UK Income
CF Woodford Income Focus
Margetts Ardevora UK Income

These are all open ended funds, I did look at ITs but concluded that none of them were better than the above.

Also, with the exception of Royal London, they are all equity funds, I don’t have any faith in the prospects for bonds in the near future. Also, I’m already investing in Vanguard Investment Grade Bond Index.

I’m aiming for an overall income of no less than 4% with a good total return

I’d be grateful for any ideas or comments.



You have chosen a selection of funds which have performed reasonably well over a relative short period of time. Your choices are pretty much the same as I would have advised to a client, (although they are not where I invest my money).
Your UK funds contain in excess of 220 stocks, so in effect, you've bought a very expensive tracker.You should underperform the sector by the amount that you pay in performance, management and platform fees.
If your desired route is to invest this way, you could always tap into HL's (not insignificant) research budget for free and take a look at their multi manager income constituents, I'm sure they're equally as qualified at choosing funds as some others.


My choice of UK funds is biased towards small and mid cap stocks and to higher dividends for large cap. Is there a tracker (an etf maybe) that does this?

Your point about the HL multi manager fund is a good one but HL are from perfect imo. I have looked at their top ten holdings in both the high income and growth&income mm funds. I've used these as a guide as well as many other factors. I'm no expert, which is why I'm interested in your views, but some of their choices seem biased to their 150+ funds. E.g. surely Chelverton UK Equity Income is better than the Marlborough multi cap income, and Woodford's Income focus fund better than his original UK equity fund? Woodford's expertise is large cap income and not small cap, AIM, start ups etc as has so far been demonstrated by the performance of his patient capital trust and equity income funds?
Big boy
Posted: 18 June 2017 16:27:59(UTC)
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Much easier manageing the revenue a/c for Investment Trust as against a Unit Trust. I managed both. Be carefull you are not buying Income at expense of Capital. Sometimes better to go for total return and take some capital.....CGT is lower than Income tax. Also if buying ITs on discount of say 10%......this means income on say 110p is earned against cost of 100p
Check out how debt and expenses are charged as not always taken from revenue.
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Tyrion Lannister on 18/06/2017(UTC), North Star on 21/06/2017(UTC)
Tyrion Lannister
Posted: 18 June 2017 16:35:19(UTC)
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TJL;48018 wrote:
I was (partially) trying to make the same point as Betty G (in relation to 'performance, management and platform fees').
I started out in about 1997 by investing in funds, but after many years, became aware of the issue of fees (as did many others), and after doing some rough calculations (because what you pay is never very obvious) discovered I was paying an awful lot.
I now invest almost completely in investment trusts, and investments trusts which are highly rated and regarded, pay a good dividend and have low charges are my preferred choice (i.e. CTY).
But good luck, we must all make our own decisions.


CTY is one of the better ITs for income, and I'm still looking at this. But the simple way i see it is that if an ITs income is 0.5% lower than a roughly equivalent open ended fund, and historic total return is also lower, then the platform charge is irrelevant. I could well be missing something though....
Tyrion Lannister
Posted: 18 June 2017 16:40:37(UTC)
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Big boy;48022 wrote:
Much easier manageing the revenue a/c for Investment Trust as against a Unit Trust. I managed both. Be carefull you are not buying Income at expense of Capital. Sometimes better to go for total return and take some capital.....CGT is lower than Income tax. Also if buying ITs on discount of say 10%......this means income on say 110p is earned against cost of 100p
Check out how debt and expenses are charged as not always taken from revenue.



I have considered total return, that's why for example I've included Newton Glbal Income which pays a miserly 3% dividend. Ive tried to cover everything but am far from sure I've got it right.
david ogilvy
Posted: 18 June 2017 17:24:33(UTC)
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Have a look at Royal London Equity Inc. run by Martin Cholwill.
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Joe Soap on 19/06/2017(UTC), Tyrion Lannister on 19/06/2017(UTC)
TJL
Posted: 18 June 2017 17:30:54(UTC)
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I am just trying to say, that before you decide 'the platform charge is irrelevant,' you might like to do the maths.
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