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    • Sue58
    • By Sue58 1st Jun 17, 2:23 PM
    • 78Posts
    • 11Thanks
    Sue58
    Equity Income Funds
    • #1
    • 1st Jun 17, 2:23 PM
    Equity Income Funds 1st Jun 17 at 2:23 PM
    It seems that Equity Income Funds (both UK & Global) are popular with investors and especially those who invest for income only. I think I understand that in general they offer a higher dividend/yield which is attractive to income seekers and they are potentially less volatile because they invest in successful companies that will pay good dividends?

    However, if you didn't want to take an income and was investing only for growth are Equity Income Funds in the accumulative version still a viable option? Especially if you already hold a Global Fund and a UK All Companies Fund? As an example, would it be advantageous to hold CF Lindsell Train UK Equity and CF Woodford Equity Income in the UK sector and also Fundsmith and Artemis Global Income in the global sector or should you really stick to one fund in each sector?

    I'm a little bit confused on this (but trying to learn) so would appreciate any views that will enlighten me. Thanks.
Page 2
    • Linton
    • By Linton 5th Jun 17, 5:21 PM
    • 8,218 Posts
    • 8,087 Thanks
    Linton
    If the OP holds Fundsmith then I personally can't see the point in holding a global equity income fund like Artemis especially if it's not for income purposes. The same applies to the UK sector if she holds Lindsell Train then why bother with a UK Equity Income fund like Woodford.
    Originally posted by StellaN
    The problem I find with funds like Lindsell Train , Fundsmith, and Woodford is that they are highly concentrated in a small number of holdings/sectors:

    The Fundsmith manager's report for 2016 states that it generally holds shares in 20-30 companies. About 80% of the holdings are in the USA and the UK with a small scattering of holdings in 5 other European countries. Its range of sectors is also highly concentrated 85% in IT, Consumer Staples and Healthcare.

    Lindsell Train UK Equity is very similar in that it holds shares in the region of 20-35 companies, again highly concentrated into favoured sectors. 80% in Beverages (!), Financial Services, Media, and Personal Goods(?). Woodford Equity Income is almost entirely UK and holds shares in many more mostly small companies but again is focussed on a small number of sectors - Finance and Healthcare comprises about 60% of the total.

    None of them are typical members of the sector into which they are allocated. Presumably you invest in such funds because you believe the celebrity managers have magic fingers that allow them to successfully construct such idiosyncratic sets of holdings. Perhaps your beliefs are justified, perhaps not. Either way what else do you hold? Just your 3 favoured funds and nothing else? Surely very risky and the antithesis of what is normally considered a balanced portolio. Or perhaps you hedge your bets and set up a more normal parallel portfolio.

    I dont know the answer, and therefore I dont hold the funds.
    • Sue58
    • By Sue58 7th Jun 17, 9:08 AM
    • 78 Posts
    • 11 Thanks
    Sue58
    There is nothing wrong with mixing fund types within a portfolio as long as overall it gets you the exposure to different types of returns that you are looking at.

    The Artemis and Woodford funds you mention are focused on delivering a high level of income so will be at one end of the 'income versus growth' scale. Personally I wouldn't put the other two funds right at the other end of that scale. Really they are just a mix of growth and income with the overall prospects of the portfolio company being the important driver of whether it's bought or not.
    Originally posted by bowlhead99
    So particularly regarding my global exposure (and assuming I want this to be the growth part of my portfolio), if I already hold Fundsmith for (income & growth) would it be reasonable to hold a more 'out and out' growth fund that includes more technology etc and that differs to Fundsmith for instance Henderson Global Growth, Baillie Gifford Global Select or Scottish Mortgage Investment Trust?
    Last edited by Sue58; 07-06-2017 at 2:29 PM.
    • MPN
    • By MPN 7th Jun 17, 2:41 PM
    • 227 Posts
    • 71 Thanks
    MPN
    So particularly regarding my global exposure (and assuming I want this to be the growth part of my portfolio), if I already hold Fundsmith for (income & growth) would it be reasonable to hold a more 'out and out' growth fund that includes more technology etc and that differs to Fundsmith for instance Henderson Global Growth, Baillie Gifford Global Select or Scottish Mortgage Investment Trust?
    Originally posted by Sue58
    I have held Henderson Global Growth and its a very good global growth fund but quite high risk (25% technology), however, it has performed consistently well over the past 10 years and the manager Ian Warmerdam has been in place since 2009.

    If your interested in other technology holding funds then Scottish Mortgage IT or Old Mutual Global Equity are alternatives to the Henderson fund. The Baillie Gifford Global Select is also quite technology based however it has only been around for the past 3 years although the performance is impressive. The main problem with these type of growth funds imho is that they will drop more significantly than income or income & growth funds in a downturn.
    • Sally57
    • By Sally57 8th Jun 17, 10:43 AM
    • 86 Posts
    • 18 Thanks
    Sally57
    So particularly regarding my global exposure (and assuming I want this to be the growth part of my portfolio), if I already hold Fundsmith for (income & growth) would it be reasonable to hold a more 'out and out' growth fund that includes more technology etc and that differs to Fundsmith for instance Henderson Global Growth, Baillie Gifford Global Select or Scottish Mortgage Investment Trust?
    Originally posted by Sue58
    If you want more technology then Scottish Mortgage IT would work well with Fundsmith if you fancy an IT in your portfolio instead of an OEIC?
    • StellaN
    • By StellaN 8th Jun 17, 2:15 PM
    • 178 Posts
    • 52 Thanks
    StellaN
    So particularly regarding my global exposure (and assuming I want this to be the growth part of my portfolio), if I already hold Fundsmith for (income & growth) would it be reasonable to hold a more 'out and out' growth fund that includes more technology etc and that differs to Fundsmith for instance Henderson Global Growth, Baillie Gifford Global Select or Scottish Mortgage Investment Trust?
    Originally posted by Sue58
    If you already hold Fundsmith is it really necessary to hold another global fund or IT?

    Surely, if you like Terry Smith and agree with his philosophy and strategy then that should be enough. He strongly believes that the type of companies he invests in will have less of a downturn in a crash and will also recover more quickly than the index, however because his fund has not experienced a crash yet we don't know if he is right.

    You mentioned you would like a fund with more technology to run alongside Fundsmith so it would be interesting to check out how Henderson Global Growth and Scottish Mortgage IT fared during the last crash in 2008/2009 and how long it took them to recover compared to other global funds?
    • Sue58
    • By Sue58 8th Jun 17, 4:26 PM
    • 78 Posts
    • 11 Thanks
    Sue58
    If you already hold Fundsmith is it really necessary to hold another global fund or IT?

    Surely, if you like Terry Smith and agree with his philosophy and strategy then that should be enough. He strongly believes that the type of companies he invests in will have less of a downturn in a crash and will also recover more quickly than the index, however because his fund has not experienced a crash yet we don't know if he is right.

    You mentioned you would like a fund with more technology to run alongside Fundsmith so it would be interesting to check out how Henderson Global Growth and Scottish Mortgage IT fared during the last crash in 2008/2009 and how long it took them to recover compared to other global funds?
    Originally posted by StellaN
    How can I check out the Henderson and Scottish Mortgage funds over the past 10 years because it seems that Trustnet only gives performance figures over the past 5 years?
    • bowlhead99
    • By bowlhead99 9th Jun 17, 9:06 AM
    • 6,704 Posts
    • 11,903 Thanks
    bowlhead99
    How can I check out the Henderson and Scottish Mortgage funds over the past 10 years because it seems that Trustnet only gives performance figures over the past 5 years?
    Originally posted by Sue58
    Under the chart click on "create a custom chart of this fund's performance".
    Scottish Mortgage's chart can go back to Jan 95 for example if you select a large date range. If you add other things to the chart (eg other funds, indexes or industry benchmarks) which don't go back as far, it will restrict what date range is shown.
    • Linton
    • By Linton 9th Jun 17, 10:21 AM
    • 8,218 Posts
    • 8,087 Thanks
    Linton
    How can I check out the Henderson and Scottish Mortgage funds over the past 10 years because it seems that Trustnet only gives performance figures over the past 5 years?
    Originally posted by Sue58
    As Bowlhead says you can get a lot of performance data from the Trustnet charting tool. Also if you click "custom table" at the top of the search results listings you can get it to display 10 year data.
    • Sue58
    • By Sue58 9th Jun 17, 2:13 PM
    • 78 Posts
    • 11 Thanks
    Sue58
    Under the chart click on "create a custom chart of this fund's performance".
    Scottish Mortgage's chart can go back to Jan 95 for example if you select a large date range. If you add other things to the chart (eg other funds, indexes or industry benchmarks) which don't go back as far, it will restrict what date range is shown.
    Originally posted by bowlhead99
    Thank you Bowlhead for this information.

    WOW Scottish Mortgage is very impressive over the past 10 years and Henderson Global Growth is also very good!
    • bigadaj
    • By bigadaj 9th Jun 17, 4:06 PM
    • 10,006 Posts
    • 6,404 Thanks
    bigadaj
    Thank you Bowlhead for this information.

    WOW Scottish Mortgage is very impressive over the past 10 years and Henderson Global Growth is also very good!
    Originally posted by Sue58
    We have been in one of the longest bull markets in history though so compare performance to an appropriate index to see what added value there may be.

    We are just getting to the point where the gfc is a decade ago, how long these 'abnormal' conditions will continue is anyone's guess.
    • JohnRo
    • By JohnRo 9th Jun 17, 4:34 PM
    • 2,427 Posts
    • 2,180 Thanks
    JohnRo
    Also bear in mind that SMT holds a lot of tech which has enjoyed spectacular gains in recent years trading on incredible earnings multiples, some might say Alice in Wonderland in the case of Amazon which accounts for 10% of SMT, all being compounded by favourable exchange rates.

    It might well continue but when the tide does eventually turn, which it must at some point, then things could possibly all head in the other direction in an equally spectacular fashion.

    By all means hold SMT if it appeals and fits but don't get seduced by the 10 year chart.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • Sue58
    • By Sue58 9th Jun 17, 5:31 PM
    • 78 Posts
    • 11 Thanks
    Sue58
    We have been in one of the longest bull markets in history though so compare performance to an appropriate index to see what added value there may be.

    We are just getting to the point where the gfc is a decade ago, how long these 'abnormal' conditions will continue is anyone's guess.
    Originally posted by bigadaj
    Point taken about the longest bull market however SMT has still performed well over the past decade or more even though it has experienced the downturns of 2008/9 and again in 2011?
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