Troy Income & Growth Investment Trust

melbury

Thanks so much for all the really useful posts.

Like I originally said, I only heard about the Troy Income & Growth Trust as it was "suggested" by Merryn Somerset Webb in her column in December's Saga Magazine. Quite an interesting article entitled "A tortoise or a hare.....?" basically saying that it has been the least volatile stocks that have been the winners over the past decades. She refers to Francis Brooke who runs the Troy fund as a manager who "gets it."

Must say that the price of this fund initially looked attractive. Surely when looking at dividend income it is more beneficial to have more shares isn't it?

My top priority is really to get a return higher than the paltry interest rates that are currently available.

bowlhead99

Limit_and_beyond wrote: »

I liked the look of City of London. To buy this as an isa, the page linked me to Henderson Global Investers, whose charges are £25 annual and £15 to purchase/sell. Are these reasonable charges? They don't appear too excessive. My previous thoughts prior to this strand had been splitting the money between Fidelity Moneybuilder Uk index and a similar fund tracking the American market, buying these in an isa from Cavendish. Would that be a better option? I will not need the money for at least 5 years but want to see it work, in a safe ish environment. Apologies again for joining in on this thread, I hope I haven't broken too many forum rules.

Henderson are the manager of the fund while Cavendish are a platform offering products from lots of different managers. You don't have to buy direct from Henderson you could hold the shares through a broker or platform if you preferred. £25 a year to administer your ISA on £5000 or more invested is under half a percent so, as you say, will not break the bank and will be dwarfed by the actual performance up or down. Some platforms might charge you more or less depending on how they structure their charges. If you like the fund you might feel it's not worth even shopping around if the absolute max you can possibly save is £25/year anyway, and to achieve nil admin charges on unit trusts is pretty unlikely these days (certainly for the long term the way the market is moving)

The disadvantage of going direct to Henderson is that if you want to swap all or part of your holding into another trust, fund, or individual shares, Henderson only have Henderson products. So to move the money while keeping the ISA wrapper around it, you'd need to cash up, wait a while for a transfer to somewhere else, then buy in again. You'd be out of the market for a bit, which might be very handy or very frustrating depending on how it moves!

Another comment is that while £15 is not crazily overpriced for a buy/sell transaction if you don't do it very often, it would be a lot if you decided to add say 1000 into the ISA across five chunks in 2013 and had to pay 75 in dealing costs. Some platforms allow 'regular investing' at much lower rates - e.g. SIPPdeal you can trade in some trusts (including City of London) and shares at £1.50 a pop if you commit to a monthly plan.

Finally on the choice of City of London vs two trackers, completely up to you. City of London focuses (mostly but not exclusively) on UK investments, a mixture of medium and large companies for a mixture of growth and income.

Fidelity Moneybuilder tracks the UK 'all share' index which in reality is weighted very heavily towards the largest companies in only a few sectors (the FTSE 100 companies). Potentially there is more growth available, and greater diversification, by selective stock picking a la City of London with the downside of higher charges. This is debated here all the time so I won't dwell on it.

If it were me I would definitely look at splitting the ISA across countries. While FTSE companies have pretty global interests, the US market is half the world's market capitalisation and it would be blinkered to expect better success by keeping all your eggs in a UK basket.

By the time you have split the ISA pot two or more ways you have much better diversification, of course each of those mini pots is smaller and may end up costing more in admin and dealing costs etc depending on the platform.

Things would have been much easier 30 years ago when there was less competition, fewer cheap trackers, no internet for research etc. Then you'd just do some scant reseach from a newspaper, buy and hold, lose much of it, and then swear off investing forever. These days it all seems complex but none of the providers mentioned in this thread are particularly bad choices, there's just a lot to choose from.

melbury

If you want investment trust shares to be within an ISA, do you have to leave them with a manager/broker to look after rather than just holding them yourself? (if that makes sense!) I always like to have a share certificate:o

bowlhead99

melbury wrote: »

Must say that the price of this fund initially looked attractive. Surely when looking at dividend income it is more beneficial to have more shares isn't it?

No.
Imagine you buy £1000 of shares in a £100m investment fund, which has 100,000,000 shares in issue, and you pay a pound for each share.
The fund grows its assets by 10% in a year and chooses to pay half this out in dividends and keep the rest invested, it will have £5m ready to pay out. If it has 100,000,000 shares in issue it will declare dividends of 5p a share which will split the 5 million quid over all the owners.

If the same £100m investment fund had 200,000,000 shares in issue, you would have got more shares for your money when you bought in with your thousand pounds. But you would still only own the same fraction of the £100m fund. When they get the same growth over the year, they decide to pay out the same 5 million quid in dividends to all their owners. They split the same 5 million quid over 200,000,000 shares and pay 2.5p per share.

In the second example your thousand pound investment had bought you 2000 shares instead of 1000 shares, but only bought you the same fractional ownership of the fund. You owned 2000/200,000,000 of the fund or £1000 of underlying assets. Alternatively you could have owned 1000/100,000,000 of the fund which would still be £1000 of underlying assets. When those assets go up they can afford to pay you dividends. Having 2000 shares x 2.5p dividend is the same amount of dividend as having 1000 shares x 5p. If you only had one, £1000 share you would get dividends of 5000p per share. The number of shares that the fund is sliced into doesn't affect how likely it is to be able to afford to pay a dividend to its owners.

Look at it another way. Your bank account pays you 2% (2p per pound invested). If an investment fund has an objective of returning 5% total return (5p per pound invested), including some capital growth of 2% and physically paying out 3% (3p per pound invested), this is a good thing.

But this doesn't mean they will declare dividends of 3p per SHARE, because owning one share does not equate to a pound invested. The dividend rate might need to be be 1p per share or 7p per share, to acheive the objective of paying out 3% of the assets.

If you own more shares without putting in any more pounds you won't magically get more pounds of dividends. Of course some funds have a strategy of paying out a lot of income and growth to their investors as dividends, others prefer to pay smaller dividends and keep growing the assets (the share price). The percent return you get in dividends and growth isn't driven by the number of pounds or pence you have to pay for a share, it's driven by what objectives the fund has.

bowlhead99

melbury wrote: »

If you want investment trust shares to be within an ISA, do you have to leave them with a manager/broker to look after rather than just holding them yourself? (if that makes sense!)

Yes. You can't just keep carrying the share certificate round in your back pocket and then one day sell it, and when HMRC ask you just say 'oh err, that was inside an ISA tax-protected wrapper'.

I always like to have a share certificate:o

You'll get a periodic statement with your name and account number on it which tell you exactly how many of what shares/funds/trusts the ISA scheme administrator is holding on your behalf separate from his other assets.

This also makes it cheap and quick to sell and avoids complications and expense when you lose the certificate or it gets stolen or burnt or eaten by the dog.

Limit_and_beyond

Thank you very much Bowlhead 99. A comprehensive answer to my questions. I appreciate your time.

melbury

bowlhead99 wrote: »

Yes. You can't just keep carrying the share certificate round in your back pocket and then one day sell it, and when HMRC ask you just say 'oh err, that was inside an ISA tax-protected wrapper'.

This also makes it cheap and quick to sell and avoids complications and expense when you lose the certificate or it gets stolen or burnt or eaten by the dog.

That is a shame though because of course there are charges involved in somebody else holding an ISA on your behalf.


I agree about the cost of buying/selling certificated shares, but it is just something I have always done because I tend to just keep shares:o

melbury

bowlhead99 wrote: »

No.
Imagine you buy £1000 of shares in a £100m investment fund, which has 100,000,000 shares in issue, and you pay a pound for each share.
The fund grows its assets by 10% in a year and chooses to pay half this out in dividends and keep the rest invested, it will have £5m ready to pay out. If it has 100,000,000 shares in issue it will declare dividends of 5p a share which will split the 5 million quid over all the owners.

If the same £100m investment fund had 200,000,000 shares in issue, you would have got more shares for your money when you bought in with your thousand pounds. But you would still only own the same fraction of the £100m fund. When they get the same growth over the year, they decide to pay out the same 5 million quid in dividends to all their owners. They split the same 5 million quid over 200,000,000 shares and pay 2.5p per share.

In the second example your thousand pound investment had bought you 2000 shares instead of 1000 shares, but only bought you the same fractional ownership of the fund. You owned 2000/200,000,000 of the fund or £1000 of underlying assets. Alternatively you could have owned 1000/100,000,000 of the fund which would still be £1000 of underlying assets. When those assets go up they can afford to pay you dividends. Having 2000 shares x 2.5p dividend is the same amount of dividend as having 1000 shares x 5p. If you only had one, £1000 share you would get dividends of 5000p per share. The number of shares that the fund is sliced into doesn't affect how likely it is to be able to afford to pay a dividend to its owners.

Look at it another way. Your bank account pays you 2% (2p per pound invested). If an investment fund has an objective of returning 5% total return (5p per pound invested), including some capital growth of 2% and physically paying out 3% (3p per pound invested), this is a good thing.

But this doesn't mean they will declare dividends of 3p per SHARE, because owning one share does not equate to a pound invested. The dividend rate might need to be be 1p per share or 7p per share, to acheive the objective of paying out 3% of the assets.

If you own more shares without putting in any more pounds you won't magically get more pounds of dividends. Of course some funds have a strategy of paying out a lot of income and growth to their investors as dividends, others prefer to pay smaller dividends and keep growing the assets (the share price). The percent return you get in dividends and growth isn't driven by the number of pounds or pence you have to pay for a share, it's driven by what objectives the fund has.

Thanks bowlhead99, I think I understand what you are saying - basically more is not always more, sometimes less is more or just as much:)

BLB53

That is a shame though because of course there are charges involved in somebody else holding an ISA on your behalf.

I hold my investment trusts in my isa with Sippdeal (www.sippdeal.co.uk). Apart from the costs of the initial purchase - £9.95 or £1.50 regular purchase, there are no ongoing costs or charges. I transferred from iii earlier this year when they introduced the £20 /qtr charges.

I think Bowlhead has explained the share price very well but I understand it is a bit difficult to grasp everything when its all unfamiliar territory. I think thats why so called 'penny shares' are popular - you can buy a few hundred thousand for a few quid and feel very rich!

melbury

BLB53 wrote: »

I hold my investment trusts in my isa with Sippdeal (www.sippdeal.co.uk). Apart from the costs of the initial purchase - £9.95 or £1.50 regular purchase, there are no ongoing costs or charges. I transferred from iii earlier this year when they introduced the £20 /qtr charges.

I think Bowlhead has explained the share price very well but I understand it is a bit difficult to grasp everything when its all unfamiliar territory. I think thats why so called 'penny shares' are popular - you can buy a few hundred thousand for a few quid and feel very rich!

I gave up on penny shares years ago, can honestly say I made a loss on all of the ones I purchased, some disappeared completely:o