Monthly income

TCA

Are you still continuing with your portfolio of index trackers? Have to say I like the idea of an income generating portfolio as well, so am seriously considering something similar for the excessive cash I'm holding, as an alternative to ploughing more into my trackers on any market dips, as that could take forever.

JohnRo

Yes TCA, that tracker (and managed smaller cos) is a "forget about it" portfolio. This is entirely separate and something I intend taking a far more active interest in.

** I did move away from Vanguard to Blackrock D for quite a few of the tracker funds though.

My Vanguard smaller cos. tracker has outperformed all the individual regional smaller cos. managed funds btw...

TCA

JohnRo wrote: »

My Vanguard smaller cos. tracker has outperformed all the individual regional smaller cos. managed funds btw...

As has mine. It's also outperformed all my other Vanguard regional index funds!

JohnRo

Time to abandon managed regional smaller cos. funds me thinks. Not just yet though, i'll give it another year or so to persuade me otherwise.

My Blackrock US equity tracker is the best performing fund in that portfolio, currently. The Vanguard Smaller Cos. tracker a close second.

JohnRo

Have to admit i'm struggling, these look the most likely at the moment bearing in mind I have LTBH growth elsewhere.

Really can't decide on whether to include JPM mecantile, on a good discount (at time of research) and maybe drop law but want to try and balance the monthly dividends as much as possible.

The only way I can see to solve the regular monthly income aspect (and some considerable indecision) is to have a great many of them included.

The totals are simple non weighted averages of the entries highlighted

mike88

I think you have far too many holdings. My advice based on 25 years of investing experience is to hold around 2 to 3 funds in each of your investing sectors. This enables you to move quickly if the trend moves against the sectors you are holding. At some point markets in certain sectors do under perform so a nimbler portfolio is helpful in this respect.

For example over the last 3 years the smaller companies sector has increased by 72%, the biotechnology sector by 94% while the commodities sector has fallen by 13% and the Natural Resources sector by about the same. Do you really want to hold funds in sectors that bomb so badly?

As matters stand you have picked mainly good performing funds from league tables but please bear in mind that many of the equity income funds for example hold pretty much the same companies so the variation in performance is not always that great. I would opt for a couple of core holdings in each sector. Basically by covering all bases you are likely to end up with sectors where some funds do well and some badly creating a portfolio that in all probability will fair no better than an average performing international fund.

Indeed, by having such a wide variation of funds you are probably more or less duplicating an international fund. Unlike your portfolio an international fund manager has the ability to move his investments to the areas that he thinks will perform best. He will certainly ditch funds in sectors that do badly.

My advice is to ask yourself do you really need a portfolio with so many holdings?

JohnRo

Many of these IT's are well established, have stood the test of time and appear to have impressive track records to back it up.

My limited experience tells me it's important to be diversified and hold investments in a great many sectors at all times. I do hold a larger portfolio, IFA managed, and also a globally diversified index tracking growth portfolio. Clearly some sectors do better than others at times but I don't have the time, ability or inclination to try and predict which will outperform ahead of time.

Not knowing which sectors are going to do well ahead of time, the only way I see to capture any significant part of a sustained rise is to be in there all the time.

This thread started because I feel that I need an independent portfolio that provides a strong sustainable income stream. Whether that can be done best with two or three holdings or a basket of many more is something I can't decide, but the requirement I'm aiming to achieve is a strong monthly income and holding a great many income IT seems to facilitate that better than holding fewer.

I suspect you're right about holding fewer funds, for all sorts of reasons although I don't buy the nimble argument. Where else am I going to generate a regular income other than from investments designed and proven specifically to do just that?

Perhaps a better way to skin the same cat is to invest for growth and sell the income required? That would end up being prohibitively expensive using IT though, given the dealing costs and modest sum involved.

TCA

JohnRo wrote: »

Perhaps a better way to skin the same cat is to invest for growth and sell the income required? That would end up being prohibitively expensive using IT though, given the dealing costs and modest sum involved.

There's also the fact that you're using an ISA wrapper, so might not want to be selling frequently. Not necessarily of course but perhaps a consideration.

JohnRo

I'll have a year or possibly two to try and get this portfolio fine tuned, see how it's behaving and hopefully have it doing what I want it to, without needing the income. At some point though the income generated is going to need to be syphoned off. I'm aiming for a monthly £150 plus but that might be a bit ambitious.

Were it not for the IT total performance, which is compelling, I'd be inclined to just have a higher yielding UK centric UT income portfolio with some global income funds and just rebalance when I felt it prudent. I've already done that to some extent as stated earlier but clearly the larger part of the investment is still undecided.

Unfortunately rebalancing an IT is going to be a pricey undertaking and given the sums involved, likely to snaffle a big chunk of any gains and defeat the object of that exercise so that won't be happening. That for me is a good reason to perhaps shift towards holding fewer IT with a larger allocation to each.

Ark makes the point, I'm probably better drawing a regular monthly income from an ISA wrapped dividend cash pool that can support it indefinitely and not worry about trying to spread dividend payouts evenly by holding an excessively large number of investments.

JohnRo

Thanks again for taking the time, much of that chimes.

I've shared similar thoughts on many of the points you raise, especially the last paragraph. There is a glimmer of method to the madness, I'm just not sure the pot is big enough at this stage to have that many IT investments and be efficient when it comes to moving parts of it around or as I am prone to do from time to time, take a reasonable profit as and when it presents with a view to reinvesting later at a discount. I've tended to do this when funds start showing 20% gains in short time frames on the basis that's in line with at least a couple of years worth of acceptable growth to me personally and should provide an opportunity at some point to reinvest at a discount. It's not very scientific but it is what it is.

The whole rebalancing discussion is only related to my somewhat misguided intention of having many funds with different dividend dates combined to provide a fairly smooth monthly income. Rebalancing to lift or lower a payout on certain months if required, far more easily said than done, as opposed to just having a larger cash pool buffer from which monthly income is taken. That now seems a far better way to proceed and a larger cash pool allows opportunistic buying without having to sell.

I think a compromise of initially investing larger amounts in a smaller number of perhaps three or four good solid growth and income IT with slightly lower yields but with strong dividend growth potential, is the way to go all things considered, and then have the remaining balance in a cash pool and UT to feed them.

Perhaps the way forward is not to try and do everything in one go but allow things to develop. I've got about another 10 days before the transfer lands.