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  • FIRST POST
    • JohnRo
    • By JohnRo 20th Jun 13, 1:38 PM
    • 2,458Posts
    • 2,213Thanks
    JohnRo
    Monthly income
    • #1
    • 20th Jun 13, 1:38 PM
    Monthly income 20th Jun 13 at 1:38 PM
    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?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
Page 17
    • bostonerimus
    • By bostonerimus 22nd Aug 17, 2:20 PM
    • 1,119 Posts
    • 628 Thanks
    bostonerimus
    It will be Vanguard.

    Doesn't matter what the question is his answer is always "Vanguard".
    Originally posted by greenglide
    For me Vanguard and TIAA-CREF have worked well, but there are lots of places to buy low cost trackers. I just recommend what has worked for me.
    Last edited by bostonerimus; 22-08-2017 at 2:49 PM.
    Misanthrope in search of similar for mutual loathing
    • JohnRo
    • By JohnRo 22nd Aug 17, 2:57 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    Yes, I know I'm a broken record and that evangelism is annoying, but so is the voodoo and over complication often associated with investing. Having 29 funds will work for some people, but it's not necessary and there are far simpler ways of doing DIY drawdown.
    Originally posted by bostonerimus
    Fair comment, there's nothing particularly complicated or 'voodoo' about administering a few more trusts though and the monthly rebalancing purchases at CSD are now cost saving at this point. It's a style choice I've made and given reasons for.

    With a spreadsheet this is no more difficult to administer than it would be if I only held one trust in each category or less for that matter.

    I'll concede the spreadsheet is more complex than it needs to be, has consumed some time and may not be some peoples idea of 'fun' but I'm interested in constructing it for informational purposes, it's not exactly hard work. A lot of what I'm detailing is simply playing about with data and spreadsheet operation, rather than being required for essential investment admin.

    I keep changing a few aspects from time to time but that's about aesthetics and internal operation rather than investment necessity.

    Hindsight might well reveal that a single VWRL investment would have delivered a better outcome longer term and been much the better, smarter option but I'm prepared to put that to the test here (in this portfolio) and live with the comments and consequences.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • bostonerimus
    • By bostonerimus 22nd Aug 17, 4:06 PM
    • 1,119 Posts
    • 628 Thanks
    bostonerimus
    Fair comment, there's nothing particularly complicated or 'voodoo' about administering a few more trusts though and the monthly rebalancing purchases at CSD are now cost saving at this point. It's a style choice I've made and given reasons for.

    With a spreadsheet this is no more difficult to administer than it would be if I only held one trust in each category or less for that matter.

    I'll concede the spreadsheet is more complex than it needs to be, has consumed some time and may not be some peoples idea of 'fun' but I'm interested in constructing it for informational purposes, it's not exactly hard work. A lot of what I'm detailing is simply playing about with data and spreadsheet operation, rather than being required for essential investment admin.

    I keep changing a few aspects from time to time but that's about aesthetics and internal operation rather than investment necessity.

    Hindsight might well reveal that a single VWRL investment would have delivered a better outcome longer term and been much the better, smarter option but I'm prepared to put that to the test here (in this portfolio) and live with the comments and consequences.
    Originally posted by JohnRo
    There's a lot of fun to be had with investing and being an physicist I'm a sucker for the details and the beauty of data. I'm a big promoter of people doing their own investing and so I love that you are so connected to your portfolio. But most people are going to find your approach a bit intimidating so I just wanted to point out that it's possible to do DIY investing using a far simpler set of tools on a far smaller number of funds.
    Misanthrope in search of similar for mutual loathing
    • JohnRo
    • By JohnRo 10th Sep 17, 3:15 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    I've mentioned this before in this thread but the FX anomaly with EAT dividend payments seems to be consistent.

    Obviously plus or minus one percent is easily dismissed but what is going on with the August payouts?



    I dread to think it's some sort of creative accounting or hidden charge so what Earthly reason can there be for this consistent discrepancy every August?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • grey gym sock
    • By grey gym sock 10th Sep 17, 3:44 PM
    • 4,131 Posts
    • 3,633 Thanks
    grey gym sock
    what Earthly reason can there be for this consistent discrepancy every August?
    Originally posted by JohnRo
    dutch withholding tax!

    see https://www.investegate.co.uk/european-assets-tst--eat-/rns/dividend-declaration/201708010700206458M/

    a gross dividend of Euro 0.2964 (net rate - Euro 0.2628) ...

    The August gross dividend is increased to offset the element of
    Dutch withholding tax applicable and provide an annual payment to
    shareholders representing a full 6 per cent of closing net asset
    value per share of the Company at the end of the preceding year.
    well, EAT does appear to be incorporated in the netherlands. i don't know why, or precisely how this works.
    • JohnRo
    • By JohnRo 10th Sep 17, 3:57 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    Thank you very much GGS, this has clearly escaped me. Much appreciated.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 10th Sep 17, 4:29 PM
    • 1,315 Posts
    • 754 Thanks
    TCA
    John, comparing your spreadsheet to the EAT dividends below on the F&C website, I saw differences in the August euro amounts so my first thought was tax.

    http://www.fandc.com/uk/private-investors/investment-trusts/european-assets-trust/dividend-history/

    Then after some googling found this:

    http://ican.tddirectinvesting.co.uk/alliance-news/european-assets-trust-raises-august-dividend-to-absorb-dutch-tax-cost-01-08-2017/

    Is it the case then that you're comparing a gross dividend amount for August when you should be using the net amount?

    GGS beat me to it by 45 minutes which shows how much screen staring time it took me to work it out! This might also clarify:

    https://www.tax-consultants-international.com/read/Dutch_withholding_taxes
    Last edited by TCA; 10-09-2017 at 4:31 PM. Reason: GGS beat me to it!
    • JohnRo
    • By JohnRo 10th Sep 17, 10:16 PM
    • 2,458 Posts
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    JohnRo
    Thanks T, this has completely flown under my radar, which I'll concede isn't difficult.

    Some of my confusion over net/gross is in small part because CSD list the EAT dividend payments as GROSSdividend in their account statement.

    I need to get a SIPP sorted out. I've decided to hold the Vanguard REIT's in one and it looks like EAT is also a candidate.

    https://www.gov.uk/government/publications/netherlands-tax-treaties

    I'm assuming a SIPP will qualify as host country resident for dividend withholding tax purposes?
    Last edited by JohnRo; 10-09-2017 at 10:32 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • greenglide
    • By greenglide 10th Sep 17, 11:18 PM
    • 2,895 Posts
    • 1,867 Thanks
    greenglide
    So this explains my confusion over EAT dividend as well.

    I hold EAT is an ISA with youinvest and also with TD in a dealing account.

    The August dividend for the TD account arrived as two payments when previous ones have only been a single payment. The youinvest arrived as a single payment.

    Having looked again the youinvest dividend have a dividend and a tax component in a single payment, I assume TD treat them as separate payment.
    • JohnRo
    • By JohnRo 26th Sep 17, 2:58 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    Maximum Draw Down (MDD)
    I've added this parameter to the spreadsheet simply for informational purposes and to hopefully gain a sense of how resilient the portfolio is becoming over time to the effects of the underlying assets valuations and their market volatility. In doing so I've encountered a bit of an oddity.

    As it stands the formula I'm using to calculate MDD (trough value - peak value) / peak value indicates this income portfolio had a maximum draw down of -8.67% on 20th Jan 2016 which lasted a whopping 21 days..

    An indication of the volatility in 2016 perhaps as that was around the time the worries about China blew up if I recall but I'd expected a bigger number for much longer somehow, seeing that the portfolio's total return percentages have risen and fallen by much larger amounts.

    The relatively modest -8.67% MDD is in large part because new money is going into the investment at various points throughout the year and so constantly lifting the portfolio valuation even when markets are doing their best to reduce it.

    But that's the problem. Question is does this sound right? I don't see how the new contributions going in, killing off the troughs and lifting the value to new peaks can be excluded yet that itself also seems to be give a false sense of things like the volatility and actual draw down of the underlying assets.

    Is MDD something that doesn't compute well on a portfolio that is receiving contributions or am I doing it wrong?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TrustyOven
    • By TrustyOven 26th Sep 17, 3:26 PM
    • 670 Posts
    • 712 Thanks
    TrustyOven
    Hmmm... How do you calculate MDD in your spreadsheet?

    Won't you have to store daily valuations to be able to calculate the MDD between certain dates as you have shown above?

    How do you organise such data in your spreadsheet - wont you have a ton of values and a very complex system?
    Goals
    Save £12k in 2017 #016 (£4212.06 / £10k) (42.12%)
    Save £12k in 2016 #041 (£4558.28 / £6k) (75.97%)
    Save £12k in 2014 #192 (£4115.62 / £5k) (82.3%)
    • JohnRo
    • By JohnRo 26th Sep 17, 3:43 PM
    • 2,458 Posts
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    JohnRo
    Dates are periodic, they don't have to be daily to maintain integrity, it's just not as super accurate as a daily would be but that's something I'm not at all interested in maintaining so I simply record events which are predominantly contribution, transaction and dividend payment dates. That's more than enough maintenance for me thank you..

    That gives resolution of approx. weekly on average (at a guess)

    Investment account total values are already recorded in column F starting at line 10, so I simply drag this formula down a new column somewhere called MDD. (this is in oocalc so uses ; instead of ,)

    =MIN((F10-MAX($F10:F$1000))/MAX($F10:F$1000);0)*100

    That's all that's required, the lowest value from the entirety of that column is the maximum draw down. I already have dates and account totals recorded so the inclusion of this is about as effortless as it gets.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • Eco Miser
    • By Eco Miser 26th Sep 17, 4:11 PM
    • 3,176 Posts
    • 2,940 Thanks
    Eco Miser
    Investment account total values are already recorded in column F starting at line 10, so I simply drag this formula down a new column somewhere called MDD. (this is in oocalc so uses ; instead of ,)

    =MIN((F10-MAX($F10:F$1000))/MAX($F10:F$1000);0)*100

    That's all that's required, the lowest value from the entirety of that column is the maximum draw down. I already have dates and account totals recorded so the inclusion of this is about as effortless as it gets.
    Originally posted by JohnRo
    That looks like excessive calculation to me.
    In 6 cells (3 of which are labels) put
    Peak ...| =MAX($F10:F$1000)
    Trough | =MIN($F10:F$1000)
    MDD ...| =(Trough - Peak) / Peak

    the ...| are cell boundaries

    That still has the problem that you keep adding to your investments. To get round that you need to unitise your portfolio and take the peak and trough unit values. See http://monevator.com/how-to-unitize-your-portfolio/
    Last edited by Eco Miser; 26-09-2017 at 4:13 PM. Reason: aligning formulas
    Eco Miser
    Saving money for well over half a century
    • JohnRo
    • By JohnRo 26th Sep 17, 4:25 PM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    Yes I have already unitised the portfolio, will investigate further. The duration is incorrect too, I wasn't measuring the time between last peak and new peak but mistakenly time from peak to trough.

    That looks like excessive calculation to me.
    In 6 cells (3 of which are labels) put
    Peak ...| =MAX($F10:F$1000)
    Trough | =MIN($F10:F$1000)
    MDD ...| =(Trough - Peak) / Peak

    the ...| are cell boundaries
    Won't work, it isn't taking account of chronology.

    ** Applied to unit values MDD = -13.39% on the same date (20/01/16) which is much closer to what I expected, thanks.

    Need to cobble a formula that works out the duration now. A job for later, thanks for input.

    Added this to the spreadsheet for those interested. Duration formula wasn't quite as simplistic as I'd hoped.

    Last edited by JohnRo; 27-09-2017 at 4:05 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • Tony12345
    • By Tony12345 26th Sep 17, 11:58 PM
    • 14 Posts
    • 1 Thanks
    Tony12345
    I have just put some money in Fidelity Enhanced Income Class W (Monthly) , let me no what u put your money in its nice to no
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