Index Trackers

dunstonh

conventional (old fashioned you could say) trackers do not pay dividends. Most will pay them them nowadays unless they are wrapped up in a GEB product, for example. There are some exceptions to that as well.

whiteflag_3

Can anyone tell me what the dividend yield on the L & G FT100 tracker is? I can find the distribution dates but cant find the the actual current income yield anywhere.

carnet

whiteflag wrote:

Can anyone tell me what the dividend yield on the L & G FT100 tracker is? I can find the distribution dates but cant find the the actual current income yield anywhere.

http://www.landg.com/investment/fundprice1_index.jsp

EdInvestor

dawny10 wrote:

One (possibly daft) question about trackers - what happens with dividends?

You have a choice. If you choose the "Inc" (for income) or "Dis" (for distribution) version of a tracker fund, the divi will be paid into your account.If you choose the "Acc" ( for accumulation) version, it will be reinvested in the fund.

The yield on the L&G FT All share tracker at present is 2.62%, which gives you an idea - I can't find the FTSE100 fund yield either.

Historically "Equity income" funds have outperformed trackers.This is because the former choose shares which pay higher dividends.Fairly obvious really.

So I would go for one of those. But I would buy it through a discount broker so I didn't have to pay high charges.

After I'd done that for a while I'd consider buying the underlying shares directly and just holding them long term, so I don't pay any charges at all. Info on how to do that is also at the Motley Fool site on the "High Yield Portfolio" board.

hobbesandco

Just one caveat about UK Equity Income funds. They have done very well over the past several years. However, it doesn't mean they will continue to do so. Value stocks and high-yield stocks are coming back into vogue which may mean the P/Es will rise for these stocks if people continue to buy into these. Don't necessarily follow the herd in this respect.

As an aside to dunstonh, I have never bought any mutual funds therefore I have not paid 5% for any charges. However, I have checked some equity income funds and some do charge 5%. All I am saying is don't be caught out by charges. As for your argument about not worrying about charges I entirely disagree. Yes if one year your returns are 20% and you get charged 5% then you're still beating the index tracker but what about the next year and the year after that? One other thing when I mention funds it's implied that these funds are across sectors. Also, can you supply statistics about down times for UK Equity Income funds? It seems to me you're quite happy to list the disadvantages of the trackers. I'd be very interested to hear which years were bad for UK Equity Income funds and why and whether or not continually reinvesting dividends in trackers during these years would beat alternatives during this period. And also what would you suggest doing in these 'bad' years? Or do UK Equity Income funds continue to outperform trackers year after year?

dunstonh

However, I have checked some equity income funds and some do charge 5%.

Thats if you buy them at full retail price. There are ample distribution channels available where you dont need to do that.

As for your argument about not worrying about charges I entirely disagree. Yes if one year your returns are 20% and you get charged 5% then you're still beating the index tracker but what about the next year and the year after that?

Assuming you do buy them at full cost, then the 5% is only once. It's not every year.

It seems to me you're quite happy to list the disadvantages of the trackers.

There are ample comments which correctly list the advantages. I just list the disadvantages as a balance. This doesnt make me against them.

Also, can you supply statistics about down times for UK Equity Income funds?

I'm not on the right computer to do that now but i can recall that the boom periods of the UK stockmarket had the trackers outperforming UK Equity Income funds.

And also what would you suggest doing in these 'bad' years? Or do UK Equity Income funds continue to outperform trackers year after year?

I dont believe that limiting yourself to just UK equity income or just UK tracker is a sensible option. I also dont believe that switching them round all the time based on what you think may happen is a good idea either. You can over do the micromanagement of these things and each switch incurs a charge.

A better approach is to spread yourself around a lot of sectors and periodically rebalance the portfolio. So funds that have gone up have some taken out to go into the funds that have gone down. Generally, what goes up comes down and what goes down comes up on the zig zag of the markets. Doing that over a wide spread of sectors,whether it be with trackers or managed funds or a combination is a far more sensible solution than picking 100% to go into L&G FTSE tracker.

Ignoring managed funds means you would have missed out on corporate bonds, gilts, property and a number of other sectors. Utilising those funds, as well as higher risk funds, in a half yearly or annual rebalancing portfolio over the growth and crash years would have seen reduced losses and more significant gains.

I dont care if people pick trackers or managed funds. However, just picking a FTSE 100 tracker and lumping for that only just because you save yourself 0.75% a year in charges just isnt sensible investing.

worried_and_confused

dunstonh wrote:

I dont care if people pick trackers or managed funds. However, just picking a FTSE 100 tracker and lumping for that only just because you save yourself 0.75% a year in charges just isnt sensible investing.

Sound words as ever.

If I had any money I'd take dunstonh on as my financial advisor

whiteflag_3

Carnet thanks for your link-i made the mistake of looking on the IFA website (which is dire)

You know from previous postings that im not convinced by trackers. I cant get my head round the dividend distributions. For example looking at the L&G Index FUnd the Gross Red yield is 2.46%, which seems really low when you look at the constituent parts eg 8.5% alone in BP .

Am I being simplistic in thinking that part of the income distributions "disappear" during their funding of the "financial instruments" they use as part of their investment process? Which in effect is an additional charge , although not explicit.

On another note their website refers to income distributions as "interest". No wonder the man in the street is confused.


Note to Edinvestor - any reply by you to this post will be ignored by me.

carnet

whiteflag wrote:

For example looking at the L&G Index FUnd the Gross Red yield is 2.46%, which seems really low when you look at the constituent parts eg 8.5% alone in BP .

Am I being simplistic in thinking that part of the income distributions "disappear" during their funding of the "financial instruments" they use as part of their investment process? Which in effect is an additional charge , although not explicit.

On another note their website refers to income distributions as "interest". No wonder the man in the street is confused.

Are you sure you're looking at the right fund ?

The terms "gross redemption yield" and "interest" refers to non equity funds eg bonds, gilts (and distribution funds where at least 60% is maintained in fixed income).

I haven't checked the Key Features of the L&G FTSE 100 tracker but annual charges will almost certainly be taken from income (as its not primarily an income fund) - and I believe all the L&G funds have their annual charges and expenses deducted from income (provided there's enough).

Quoted yields are normally based on the gross dividend prediction of the managers.

whiteflag_3

carnet wrote:

Are you sure you're looking at the right fund ?

The terms "gross redemption yield" and "interest" refers to non equity funds eg bonds, gilts (and distribution funds where at least 60% is maintained in fixed income).

I haven't checked the Key Features of the L&G FTSE 100 tracker but annual charges will almost certainly be taken from income (as its not primarily an income fund) - and I believe all the L&G funds have their annual charges and expenses deducted from income (provided there's enough).

Quoted yields are normally based on the gross dividend prediction of the managers.

Thanks carnet your right, just looked at it again . They mark all income with * interest on GRY. I had just looked at a few of their equity funds , saw the asyterisk and thought thats wrong, its not interest as you point out. They have the same on every fact sheet.

Do you know the average current yield for the FTSE 100 index?