Monthly Income whilst maintaining capital

gil13

I realise that this topic has probably come up over different forums plenty of times before but I was thinking it might be useful to start a new thread with current thinking about how best to preserve capital whilst taking a monthly income. It is quite a relevant area as there are many groups that are in such a situation; those retired folk perhaps, or families where mum has gone part time or given up work to look after the baby, or those that have accrued a good amount of savings through ISA's or other regular saving methods.

These groups may have savings of 20,30,40k or more over the years. The family with the new baby might have managed 40k for example but now need to use some of that sum each month for a few years perhaps, whilst maintaining capital. Should they leave the cash ISA's alone and use the interest (but the inflation eats away at it) or should they be using ISA's together with investments in Income type funds perhaps.

Has anyone from these groups set up a system that is working for them along similar lines or do any of the more professional and savvy amongst us have some ideas on what they would do. It would be very interesting to hear comments.

dunstonh

I realise that this topic has probably come up over different forums plenty of times before

Twice in the last day. One has had posts this morning. Rather than start another thread duplicating these, take a look at these ones.

http://forums.moneysavingexpert.com/showthread.html?t=448964
http://forums.moneysavingexpert.com/showthread.html?t=448461

chesky369

yes, but if you re-read them there aren't positive suggestions about what to do - just what NOT to do (i.e. keep money in savings accounts). If you've already used your ISA allowance, and you're not savvy with the stockmarket, there aren't obvious routes to go. I suppose it's off to a stockbroker with fingers crossed, or buy 'blue chip' shares which are quite expensive.

dunstonh

You cannot really say what to do as its a risk issue and risk is a personal thing which differs between people. You also have tax issues which could affect different people and can result in different tax wrappers being used as well as different ways of distributing the "income" i.e. natural income paid out or regular withdrawal of capital with income reinvested.

Typically, you would look at a sector allocated portfolio built for income that matches risk profile or a high yield portfolio with natural income distributed. How you build either is a matter of opinion, personal circumstances and who you use (i..e do it yourself, stockbroker, IFA or investment manager).

EdInvestor

I like a mix of

High yielding blue chip shares
Bricks and mortar property funds
NSI tax free index linkers for cash


Adjust proportions to suit level of risk.