First plunge with Investment trusts

Tridhos

I have 50K which I would like to put into investment trusts. My main requirement is income being an OAP and given the miserable returns available on savings accounts I thought perhaps I could split it between the following.

Foreign & Colonial Investment Trust
The Edinburgh Investment Trust plc
Temple Bar
City of London
Perpetual Income & Growth

I have a cash ISA in case of emergencies.

I would like to know if this is too many or perhaps there are others that people would favour rather than my choice.

kidmugsy

I was a great fan of ITs in the days when you could buy them at substantial discounts, and when their prime competitors were Unit Trusts, with their absurdly high charges. Nowadays perhaps equity ETFs might often be a better bet, though I suppose their income flows must be expected to be less stable than for many ITs. You could protect yourself from variations in income by holding a bit more cash than you would with ITs.

Five different ITs doesn't seem too many to me, though perhaps there would be an excessive overlap in the portfolios of those particular ones. I look forward to seeing what others have to say.

One chap you might like to read is the acerbic commenter "Luniversal" on The Motley Fool forums.
http://boards.fool.co.uk/basket-of-seven-annual-review-2014-13039271.aspx?sort=collapsed

rpc

kidmugsy wrote: »

One chap you might like to read is the acerbic commenter "Luniversal" on The Motley Fool forums.

Just put the kettle on and set aside several hours first :-)

There's a lot of overlap in the UK in the selection, some aren't very income orientated.

I hold Temple Bar and City of London from your list. For income, I quite like Murray International, but it is on a bit of a premium just now...

The first obvious question is "why investment trusts?" You don't want to let the choice of vehicle wag the investment dog. ITs do have an advantage for someone in your situation where they can hoard dividends to smooth out variations.

The second is, if you are comparing these to savings accounts, are you aware of an comfortable with the additional risk (volatility) that you are taking on? Cash to that selection of trusts is a big jump on the risk scale.

BLB53

I am a big fan of ITs and hold several mainly for income - similar situation to yourself. I hold City of London, Edinburgh and Temple Bar from your list - also Murray International, Finsbury Gr & Income and New City High Yield. The average yield is around 4.5% compared to less than 2% on my cash savings. I am sure the others you mention would be just as good.

The only thing I would say is that the share prices can swing around quite a bit - mostly up over the recent years but be prepared for some years when the markets turn down.

Having said that, the income stream is very reliable and rises each year to keep ahead of inflation.

A good site to check out is diy investor http://www.diyinvestoruk.blogspot.co.uk/ lots of articles on various investment trusts and portfolio summaries... also have a look at the John Baron Autumn/Winter portfolios http://www.johnbaronportfolios.co.uk/

Good luck!

takesyourchances

I have also been considering a simple IT portfolio as well for a while for an income based portfolio.

I have been considering City of London, Murray International (see its at a premium) and maybe adding in an infrastructure IT as well.

Always interested in reading posts and opinions on IT to learn more myself.

Thanks

jimjames

Any reason you have a cash ISA but not investment ISA?

When many investments are paying 3%-4% income plus capital growth you'll probably save a lot more tax and get more benefit from a S&S ISA not cash ISA.

Tridhos

jimjames wrote: »

Any reason you have a cash ISA but not investment ISA?

When many investments are paying 3%-4% income plus capital growth you'll probably save a lot more tax and get more benefit from a S&S ISA not cash ISA.

The cash ISA dates from some years ago and it was just a savings reserve. At the moment I haven't used this years allowance so I am still not sure whether to convert the cash ISA to a share ISA but would that allow me to pick the IT's that go into it?
I have no mortgage at my age so I just have my company pension, the state pension and some savings.
I have about 50 to 60K that I could invest in ITs in addition to about 35K as a cash reserve in my ISAand I feel that I can wait several years without worrying about the ups and downs in the share prices.
However thanks for taking the trouble to reply along with several other very helpful people on this forum.

Eco_Miser

You could transfer the cash ISA to S&S ISA, and and this year's £15k, making about £50k in the S&S ISA. You can choose the investments, but check the particular platform offers the shares that you want before signing up. Then keep your cash reserve elsewhere, such as in the various higher interest current accounts.

rpc

takesyourchances wrote: »

I have also been considering a simple IT portfolio as well for a while for an income based portfolio.

I have been considering City of London, Murray International (see its at a premium) and maybe adding in an infrastructure IT as well.

If what you are interested in is income and income alone, there is an argument that premiums to NAV don't matter. I haven't checked for a while, but recently infrastructure ITs were on the sorts of premium that would make your eyes bleed. I think some reached 10%+

For income, it is dividends that matter and you can argue that capital values are irrelevant. (I am on the fence with this, but I am also young enough that I am not income-focussed). A premium says that the share price is more than the underlying NAV and there is a capital risk associated with it. Aside from the impact a premium has on yield (measured against purchase price), it doesn't directly affect future income. The size of a premium or discount isn't likely to directly affect a future dividend payment, but it does perhaps show the market sentiment towards the dividend stream among other things.

Tridhos

I saw some videos on YouTube recently from Investors Chronicle which made that point about buying at a premium. That just because an IT was at a premium shouldn't deter you if you thought it was a good investment and being well run so I tend to agree with that.
I am considering an earlier suggestion of moving my cash ISA into a NISA but I am trying to find a platform that allows me to switch the cash while deciding what ITs can then go into the NISA and also adding this years allowance.

bowlhead99

Tridhos wrote: »

I am considering an earlier suggestion of moving my cash ISA into a NISA but I am trying to find a platform that allows me to switch the cash while deciding what ITs can then go into the NISA and also adding this years allowance.

Pretty much all brokers allow you to do this (i.e. transfer cash into your new S&S ISA with them, from another ISA without knowing exactly which assets you'll buy with it until it arrives and you can assess the whole of the market then). It's only really if you were applying to hold an ISA direct with the fund manager, that you'd need to know in advance which fund manager you were going to give the money to!

For example a couple I use:
TD Direct - zero annual fee, last time I moved the dregs of an old NS&I cash ISA into my existing TD S&S ISA, I think it was about a week before the cash was available, maybe more or less, didn't really notice. £12.50 per purchase or sale of an IT, and no ongoing annual fee as they'll waive it if you have more than about £5k of assets.

Youinvest is another broker that would work in the same way. No annual admin fee, £9.95 a trade, or if you're adding to your portfolio over time you can buy a wide selection of ITs on a fixed day of the month for a discounted £1.50 deal fee.

X-o.co.uk has cheaper trades (at £5.95) but no regular discounted deal fees and no ability to buy funds if you fancied that later (while you can with TD or YI)