Monthly income

JohnRo · 20 June 2013 at 1:38PM

Looking for some direction, how best to set up a solid portfolio for maximising reliable monthly income? I've looked at model portfolios and "best" lists until my head spins...

I want to avoid individual shares due to transaction costs and their perceived higher risk but willing to listen to views on that. Many of the collective UK income funds I've looked at do seem remarkably similar. Is there any real advantage to be gained by selecting any more than one good fund, perhaps overcomplicating something that only really requires picking one and just getting on with it?

At the moment I'm leaning towards picking just the one fund and ploughing the monthly income back in initially, to boost the pot, but with a view to then taking a regular income in a year or two. The only goal at this stage is to provide a strong but sustainable income for incomes sake for ever.

I have a - relatively - large LTBH growth portfolio elsewhere. I am looking at this in complete isolation and purely as an alternative to cash savings (save for the emergency fund)

The fund I've considered perhaps most suitable is the IP Distribution Z fund but I have to admit I'm a little uneasy about the level of bond exposure there. Also the yield seems a little low compared to some but I do wonder about the sustainability and capital preservation of funds claiming yields of 7% or more.

Any suggestions or ideas folks?

kidmugsy · 20 June 2013 at 3:15PM

Don't Alliance Trust do a monthly income fund?

JohnRo · 20 June 2013 at 3:22PM

They do, I haven't studied it, will take a look but it doesn't appear to do anything that the IP fund doesn't do better.

grizzly1911 · 20 June 2013 at 4:41PM

Does it have to be monthly, what about quarterly?

If you don't want the bonds what about IPHI and IPI, together their dividends pay quarterly Lower yield but overall performance "matches" or surpasses..

JohnRo · 9 July 2013 at 12:19PM

So here's a list of the funds that I've been considering. I confess I'm finding it very difficult to select any sort of "winner", performance figures are from trustnet but I don't hold any great faith in their relevance going forward. The yield figures will probably be wildly inaccurate too looking forward.

Question, is it complete and utter madness to consider making an allocation to a great many, if not most or even all, of these funds in an income portfolio and then just tinker with the weighting as they begin to fluctuate in value and yield?

The rationale being they will all (where similar) probably swap places with each other in total return performance table terms over a period of several years. The regular income not required for spending can be used to purchase more of the fund(s) performing least well to try and boost income and perhaps adjust the perceived risk longer term.

kidmugsy · 9 July 2013 at 12:38PM

JohnRo wrote: »

Question, is it complete and utter madness to consider making an allocation to a great many, if not most or even all, of these funds in an income portfolio and then just tinker with the weighting as they begin to fluctuate in value and yield?

A good way to make more money without extra risk is by minimising your taxes. I'd start by ensuring that bonds or bond funds were held in ISAs: I wouldn't spend ISA capacity on shares until I had all the bonds I wanted.

Then I'd try to spread the dividend dates so that I got a monthly income, as you clearly intend. For equities I'd use Investment Trusts rather than OEICs. And I'd reckon that I'd need one whale of a strong reason to use any more than eight: you can't really keep an eye on them if you have too many.

JohnRo · 9 July 2013 at 12:53PM

This portfolio will be ISA wrapped, approx. 50K value. Aiming for upwards of £150 plus a month income and keeping up with inflation.

I have other growth investments but I want this exclusively for monthly income. Really need to look at income trusts, it's something I tend to glance at then over look. I'm shying away from holding bonds in any significant amounts.

planteria · 9 July 2013 at 6:57PM

kidmugsy wrote: »

I wouldn't spend ISA capacity on shares until I had all the bonds I wanted.

i am interested in this kidmugsy. can you explain more, and why you say this? and what about at this very moment, being told that the bond bubble is due a burst?

Bazofts_Revenge · 9 July 2013 at 8:31PM

You said that you didn't want to invest in individual companies due to dealing costs. If you're intending to hold these for a longtime then the dealing cost plus stamp duty won't be much and there's negligible annual charge. Using an extreme example of just buying into 10 companies would cost £109.50 in dealing charges and £250 in Stamp Duty. That comes to a charge of just 0.7%. Holding the Shares in an ISA may cost an additional £72 a year which equates to about 0.1% annual charge.

This is what I can see from my experience which isn't much but you did ask. I've gone down this line with slightly more capital but I am in a similar position with a reasonable FS Pension waiting for me.

I prefer this option as I chose my portfolio and in my case it is more a case of choosing who not to invest in. Of the many UK income Funds I've looked at their top 10 investments had a similar percentages in companies I've chosen.

Supposedly this is high risk but so is getting up on a morning..

innovate · 9 July 2013 at 8:57PM

Bazofts_Revenge wrote: »

Using an extreme example of just buying into 10 companies would cost £109.50 in dealing charges and £250 in Stamp Duty. That comes to a charge of just 0.7%. Holding the Shares in an ISA may cost an additional £72 a year which equates to about 0.1% annual charge.

How much are you investing in what companies, when, how do you spread your investment across the companies?

Bazofts_Revenge · 9 July 2013 at 9:39PM

innovate wrote: »

How much are you investing in what companies, when, how do you spread your investment across the companies?

I was working off the OP's figure of £50k, As for companies well that would be for the OP to chose, Yeild. Cover, Whether the dividends are growing and whether he likes them.... I was just trying to give a view of basic costs. I wouldn't go for just 10 personally but it made the maths easier.

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