Smarter Investing

Totton

Sorry to hear about your aunt. We were in it during that time and lost a load also, thankfully we were able to stay invested and have now recovered all of those losses and made gains.

A_Flock_Of_Sheep

Totton wrote: »

Sorry to hear about your aunt. We were in it during that time and lost a load also, thankfully we were able to stay invested and have now recovered all of those losses and made gains.

Yes she said after panicking she walked away with just over £7k having started with 30k. She paid for an IFA to do it all for her and I think she paid entry fees and some exit fees and fees to the adviser also.

Stupid thing is today her £30k would be worth quite a bit more. I panicked also the other day with my Japan fund that dropped 18p over night. Next day it was up 1p again. But I sold it the day it dropped fearing further downward losses.

sabretoothtigger

Japans problem is its currency more then companies, go with a fund that isnt reliant on Yen I reckon is best.
Their 10 year bond yield has gone from 0.45% to 1% now I think and their gov says they want 2% annual inflation. So that is a ridiciously low yield, their gov debt is in trouble.

So I think they continue to be rocky but it might work well as investment if avoiding bonds or yen. I sold most but I want to come back in on any big retrace of their post xmas rise

Re Hale strategy, does he advise scaling in and out of funds

A_Flock_Of_Sheep

@ sabretoothtiger:

Tim Hales book so far has been enlightening. So far though it does not seem to focus on "investing for income" which is my interest and goal. It seems to focus on building a portfolio for retiring on and paying the mortgage. For me I have a Final Salary Pension and no mortgage so don't have those goals for my portfolio.

I am cash heavy, rely on cash to supplement my income and would like to place some cash into investments in order to achieve an income I cannot get from relying on the low interest rates. Hence my interest in Equity Income. Tim Hale though has introduced me to Bond Income which I wasn't aware existed. For example Schroder Monthly High Income although not mentioned in Tim's book is an income fund made up from Bonds not Equities. It does invest in some Sub Investment Grade Bonds as a trade off for a higher yield.

I have another book called Investing for Income by David Stevenson and I have read a little of that this afternoon and the approach is different to Tim Hales. So who do you believe?

The Hale philosophy does not seem to advocate speculating using funds. I think he refers to this as active portfolio management. He seems to favour a more passive approach and later in the book I think he mentions Vanguard under this passive approach. I am not that far on yet though. I have looked at the Life Strategy funds with bond and Equity mixes and the income yield potential seems quite limited/low rated.

Totton

Yes you are right about the Vanguard yield, it is below 2% although you could take capital which is mostly all the income funds would do anyway. Tim Hale suggests 4% max from your holdings iirc.

For equity income funds I would recommend reading the White List, it comes out every six months - http://www.whitelist.co.uk/index.php/download_file/-/view/813/

or http://www.whitelist.co.uk/index.php/

HTH,
Mickey

atush

A_Flock_Of_Sheep wrote: »

i am on page 85 - the buy high sell low diagram. it sounds just like my aunt who began investments of 30k in 2006 and then saw them drop like a stone in 2007-09 and surrendered in 08 and now says she wont do that again having lost quite a bit of cash

This is just an example of investor panic. She sold, which crystalised her loss and put her off investing. If she had remained invested, she would not have had a loss.

My father died in Summer 1987. By the time my mother got the funds from his LI, it was August. She invested the lump sum, and we all know what happened in october.

but she remained invested, and made good on the loss and went on into profit.

So, don't invet if you are prone to panic. Or, invest and dont panic.

atush

I am cash heavy, rely on cash to supplement my income

If you are working, you should live within your means, and not rely on investment income to supplement current spending. the income should be reinvested, to support longer term spending incl retirement.

vectistim

A_Flock_Of_Sheep wrote: »

I am cash heavy, rely on cash to supplement my income and would like to place some cash into investments in order to achieve an income I cannot get from relying on the low interest rates. Hence my interest in Equity Income.

Don't discount growth funds when looking for income - they can be a cunning way to provide tax free income, using your CGT allowance, eg:

Let's say we have a £500,000 fund growing at 6% and withdrawing 4% each year, and I'll round the CGT allowance down to £10,000 per year:
So our £500,000 grows to £530,000 and we take an 'income' of £20,000 from the fund. This is done by cancelling units - therefore the 'income' is return of capital plus profit. Tax will only apply to the profit.
So £20,000 in the first year - this is made up of c. £18,900 of original capital plus £1,100 of taxable gain. £1,100 < £10,000 so no tax to pay.
Hopefully over time the fund keeps growing so gradually the gain element of the 'income' increases but it can be as well to make use of the CGT allowance when planning income needs.

Perelandra

If you're investing for the long term (e.g. retirement) there's two different phases to investing:

In the "investment" period, when you're building up the size of the pot, you don't necessarily need to focus on income since you should be net contributing into the pot.

In the "disinvestment" period, say retirement, this may become more important. You may well have different investments in the two different phases.

These statements are completely different to a strategy which says "I believe that the best way to grow my pot is to invest in areas that deliver a steady income"- that's an important question to decide early on of course, but not for the reasons you've said I don't think.

A_Flock_Of_Sheep

atush wrote: »

If you are working, you should live within your means, and not rely on investment income to supplement current spending. the income should be reinvested, to support longer term spending incl retirement.

I work only part time due to a disability. I rely on my interest on cash to top up the part time income.

I have a bit of a plan in mind though now having read up more. I think I will look to a split portfolio. Two in one. One that has money invested for growth and some income. I am sure the recipe will come soon. I may even after reading take some IFAdvice. One thing's for sure to disappoint Badger09 I won't be buying anything when the market opens tomorrow.