Monthly income

graemech

I did chuckle a little when i saw
"................this seems to be the actions of a man who is bored."
But joking aside this is why this thread was set up in the first place and its worth reading the original posts. He is making a record of the steps he has taken to create an income portfolio from scratch and how it will evolve over time to suit his needs.
John, I notice Schroder real estate is in your list of possible additions, the ongoing charges are pretty high (3.9%?) is that a problem? (same for JPI 2.7% ongoing charges?)
I see the DIY investor (UK) blog has just put up his year end portfolio review and his mix of shares and investment trusts has provided 5% income and some growth. He seems to have some of the IT's that you hold and regards them as "slow and steady performers".

JohnRo

I haven't looked into property much at all, Schroder is listed purely on the basis it is shown as a trustnet top quartile performer over 5years. I never even looked at the OCF.

For all the posting here I'm not actually changing very much at all, still can't decide whether to just leave those funds already held to their own devices and adjust each new tax year with new money into existing or new holdings.

I prefer LWI, MRC, and SLET of the UK funds originally chosen because of their smaller company exposure, EDIN was a late addition to take advantage of the woodford over reaction which seems to be paying off so far. Those four are what I see as the backbone of the portfolio, which is odd really since LWI and MRC are hardly income trusts in terms of yield.

Perhaps what I'm really aiming for is a balance, some imagined sweet spot between growth & income. I'd much prefer a holding giving say 3% yield than one giving 4% or 5% if the lower yield capital is typically growing +10% since over a few years that'll prove the better choice and it isn't immediate income I'm after at this moment. Of course knowing which in advance is impossible.

I admit there's a clarity of purpose deficit though. Need to get it sorted but complicated by the fact I have other money invested elsewhere doing other things and I'm guilty of probably trying to do some of that here as well.

TCA

Any consideration given to other non-UK non-European stuff? You've got AAIF but what about SOI or HFEL? Or emerging markets income like JEMI? Probably pretty volatile and likely for further falls with more QE tapering in the US, but then what isn't.

My AAIF and SOI purchases are currently about 4.5% down and I expect further dips (and then recovery of course). But the dips are when I'll buy HFEL and JEMI. In for a penny.....

I see you've got BRWM on your list. It's also one I'm considering for diversification and I like the fact they get royalty payments to prop up the income. Also looking at BRCI which is more energy focused but a nice yield too. Not sure. Currently watching both to see how they move versus the market in general. Might even go 50/50 on them.

On the subject of smaller company exposure, I also like AAS. It's now on a discount and very close to a 52-week low having lost all the gains of the last year. It's done particularly well in recent years but I just wonder how far it'll slide. Another one I'm watching.....

JohnRo

Thanks for posting

AAS doesn't really fit with my view of an income generator with a yield of ~ 1.7% and I already have some exposure to Asian smaller companies elsewhere. That said SOI income does looks attractive, one thing I am seeing though is that quoted yields are probably not going to materialise in reality, though I'm still months away from being able to verify that.

That said SOI is a definite possibility for sure, looks to be the stand out candidate imho http://www.trustnet.com/Tools/ComparisonReport.aspx?typeCodesCF=FITSOI,FITAAIF,FJ408

JEMI is definitely on the cards, attractive as an income holding but EM is a tough call with all the QE shenanigans, I'm not convinced the US tapering is the beginning of the end of money printing.

JETI as stated up thread because I want some Euro exposure if the income is there and this seems to be as good a choice as any in the sector, Europe is forecast by some to have a good 2014 though last year wasn't too shabby either.

It's the US that has me scratching my head, I don't know what's going on with NAIT, the US markets have been on a strong run all year, with the odd wobble or two and some are saying it looks over priced, yet this fund has managed to capture none of it, or so it seems.

I looked at the trustnet regional breakdown of my current holdings here and unsurprisingly the portfolio is very heavy on UK equity so some selling and diversification room. Going to create a model portfolio on trustnet with some of these ideas and see how it looks.

Charles Stanley have a dealing fee promotion in January so this is partly why I'm keen to make any significant changes now and after 6 months of seeing how things are panning out I think they're probably needed.

TCA

Sorry John. Saw the words "Aberdeen" and "small" and immediately thought Asian, instead of presumably ASCH. Yes, AAS wouldn't be an income play.

On the subject of quoted yields, SOI is a prime example. When I bought in, it was quoting upwards of 5.6%, now nearer 4.3%.

JETI looks promising. You'll have noticed that its 2 biggest holdings, the Swiss healthcare companies of Roche and Novartis, are also held within your EDIN holding. Plenty good geographic spread of other Euro stocks. I'd also like a bit more European exposure and it is indeed tipped for a good 2014 but I'm still wary of a pullback when looking at stuff at 52-week highs. Nothing to say they won't go higher of course. There lies the decision.

I'm leaving the US (and the UK) alone for now I think, with the possible exception of filling my ISA allowance before April 6th.

JohnRo

An attempt to clean up and gain some clarity in this portfolio and create a regional structure of sorts despite all the overlapping led me to this, obviously missing the bond and fixed interest elements but not too worried about that right now. They can be added in April if I feel the need.

Selling

2,996.62 BANKERS INV TRUST ORD GBP0.25
3,029.75 CITY OF LONDON INV ORD GBP0.25
3,079.70 FINSBURY G&I TST ORD GBP0.25
1,036.64 INVESCO FD MNGRS IP DISTRIBUTION Z INC
1,017.55 INVESCO FD MNGRS IP MONTHLY INCOME PLUS Z IN
2,170.54 J O HAMBRO CAPITAL UK EQUITY INCOME A GBP DIS
2,025.84 JUPITER UT MNGRS STRATEGIC BOND I INC
1,524.03 KAMES CAPITAL PLC HIGH YLD BD B INSTL DIS NAV
2,090.53 SCHRODER UNIT TST INCOME MAXIMISER Z INC
3,062.70 TEMPLE BAR INV TR ORD GBP0.25
1,957.01 THREADNEEDLE INV GBL EQTY INC RDR Z INC NAV
23990.92 Total



Aggregate portfolio yield ~ 3.37% based on individual quotes

London and St. Lawrence is the oddball here, it's classified as Global growth and income but constituents look predominantly UK to me and over lap with some existing holdings. I do like the insurance policy aspect of it having a shed load of trusts within the one vehicle though.

A lot of what seems to be classified as UK Growth and Income is global so I don't think any clear regional distinctions can ever be made absolute without a ridiculous amount of work.

The one regret is dropping JOHambro which has been a solid performer with an attractive yield but I need to get the funds cleared off to cap annual charges at £150 or £120 if I can find the need to trade frequently enough.

TCA

That looks a lot cleaner now John. For my own approach I'm using a small number of investment trusts in larger amounts, to see how that pans out first.

I'd be interested to hear your thoughts on your choice of commodities trust. BRWM, as opposed to the actual income offering from BlackRock, BRCI.

Better size, better holdings, more longevity? What's your thinking?

JohnRo

One of the reasons I overlooked BRCI if I'm honest is because trustnet shows it having a low yield, yet having checked, Blackrock have a quoted 5.5% yield.. which I hadn't spotted earlier.

That said many of the larger oil and resource companies BRCI holds are well represented already in most of the other trusts, particularly the UK ones. Then again so are the big three in BRWM so ....

That 4% allocation slot I've occupied with BRWM is intended for higher risk selections, perhaps BRCI is a better fit at this stage, or a reduced holding in both. It's the potential upside to the capital invested in BRWM that caught my attention, not that I expect the trend to change any time soon but the potential for longer term substantial capital gain seems more attractive in my novice opinion.

As the pot size hopefully increases that should allow room for an extra high risk investment or three in that allocation slot. Biotech, Health and Tech are something I hold elsewhere in funds rather than trusts, but they're not income generators so probably wouldn't be suitable here unless I can find income varieties in the future.

For better or worse, taking into account things like discount, yield and potential capital growth, I think I'll stick with BRWM at this stage and look to include others further down the road.

TCA

That all makes sense John. BRCI has drfited back to premium territory in the last while, whereas BRWM is still on a healthy, albeit narrowing, discount. On the subject of cross-holdings, BRCI would also likely give me personally more in that respect (than BRWM would), with the exception of the BHP Billiton exposure where BRWM has far greater. So perhaps BRWM provides more diversification being 100% commodities; it does have far more conviction in its largest holdings, which I suppose that's why we see such large price swings. Not buying BRCI results in losing out on some of its biggest holdings, Chevron, Exxon and Anadarko Petroleum. The first two would certainly be included in even a US equity tracker, to the tune of about 4% of the entire fund, versus the 12% or so they comprise in BRCI. Interesting to compare. Prices of both trusts look to move in similar patterns over time, but BRWM moves in far greater proportions. I think either will prove a bumpy ride but think I'll be joining up at some point.

JohnRo

Forgive the lousy pun but I haven't drilled down into the minute detail of either, it's more the themes I'm interested in. I'm not sure it's that much of a worthwhile exercise with collectives anyway since the constituents and/or ratios will change over time.

This is how a mock up of the trimmed portfolio looks in trustnet's portfolio tool.



Frequent +/- 10% swings overall, which is something I can comfortably live with.

I've sold a few things already in anticipation but the new additions were all well up today except SOI.. so I'll risk a delay and see if I can snag a lower buy price before the end of this month, when all the selling this week has settled