Any recommendations for income and slight growth?

stringer_bell

I have filled up my ISA this year, and have a large cash balance, and I thought now would be a good time to buy outside an ISA, as I don't see myself needing the money for quite a bit, and I'm sick of my money not growing

* Yes I have filled up the current accounts etc *

Today I went and bought £1k worth of HSBC FTSE 100 Tracker, and have the dividends re-invested, I see the yield is around 3.8 percent, which is decent, However I don't expect this to grow much

I need to find a good balance of growth and income, my main questions are,

Is 3.8 a safe yield? Ie The higher the yield, the more volatile the shares are, so I'm looking for something stable. Are investment trusts good for this and is 4 or 5 percent stable?

dunstonh

Today I went and bought £1k worth of HSBC FTSE 100 Tracker, and have the dividends re-invested, I see the yield is around 3.8 percent, which is decent, However I don't expect this to grow much

What made you choose one of the worst performing index tracking areas for the last 20 years? (through multiple economic cycles it has been consistently amongst the worst performing)

You have bought something in the UK equity sector. What about all the other sectors? What do you hold in those?

Is 3.8 a safe yield?

Yield is not safe. The asset that produces the yield is the risk and that will be variable.

Ie The higher the yield, the more volatile the shares are,

There is some element to that as high yielding shares do not "tend" to have as much growth in share price. Its a simplistic view in isolation of other information though. They can still do a BP, Tesco or Lloyds Bank or even a Polly Peck.

Are investment trusts good for this and is 4 or 5 percent stable?

investment trusts can offer greater growth potential but can also carry greater risk on a like for like basis to a UT/OEIC. Again, yield is not an indication of stability. A 4% yielding fund can still drop 40% in 12 months.

stringer_bell

dunstonh wrote: »

What made you choose one of the worst performing index tracking areas for the last 20 years? (through multiple economic cycles it has been consistently amongst the worst performing)

The recent drop in the ftse, made me think it will probably bounce back up to those levels, so in my mind, its a very easy 10-20 percent gain, although I might be thinking about this all wrong

You have bought something in the UK equity sector. What about all the other sectors? What do you hold in those?

the ftse 100, it may drop another 20 percent, I would then topup more, fine. It could rise 20 percent, great.. along with 3 percent yield, that would be a decent start. That is why I picked the 100 tracker for a start. It's better than the 1% its currently getting at the moment

I have a high growth ISA portfolio with a ton of funds outside of the uk, this is my first time investing outside a wrapper, I thought I'd start small

I could of course go outside the UK, trustnet has such a wealth of funds, its hard to know where to start really, I get lost in all the information

dunstonh

the ftse 100, it may drop another 20 percent, I would then topup more, fine. It could rise 20 percent, great.. along with 3 percent yield, that would be a decent start. That is why I picked the 100 tracker for a start. It's better than the 1% its currently getting at the moment

I understand your reason for investing. Lots of people look to increment during periods of decline. Its a good thing to do. However, why FTSE100? Why not FTSE all share or FTSE250? Or UK Equity income (seeing as you like yield)?

I could of course go outside the UK, trustnet has such a wealth of funds, its hard to know where to start really, I get lost in all the information

And that is where multi-asset funds come into play.

bowlhead99

stringer_bell wrote: »

Today I went and bought £1k worth of HSBC FTSE 100 Tracker, and have the dividends re-invested, I see the yield is around 3.8 percent, which is decent, However I don't expect this to grow much

I need to find a good balance of growth and income, my main questions are,

Is 3.8 a safe yield? Ie The higher the yield, the more volatile the shares are, so I'm looking for something stable. Are investment trusts good for this and is 4 or 5 percent stable?

Yes, 3-5% is probably in the safe range in terms of not being ridiculously unsustainable.

5 is more at the top end - but is probably possible with an actively managed fund or investment trust that is deliberately targeting higher dividend payers, and in such cases you would expect them to have done their due diligence on the companies invested in, as to whether in their considered opinion the dividends will last or will face significant cuts. Who knows if they will be right - there is no such thing as certainty.

With the FTSE100 it has been yielding 3%+ for decades. It has also historically provided growth and income. It's probably unlikely to drop to just 1 or 2 percent. You would probably expect, for example, oil companies might cut back their dividends when the oil price is on the floor, but then again, the price of those shares has already fallen in anticipation so the percentage yield of dividend against the price may continue to be broadly the same.

However, it is worth noting that FTSE 100 is just a passive allocation to the largest companies that happen to be listed on the UK stock exchange and has high concentrations in certain industries (e.g. oil and gas, resources, pharmaceuticals, banks) and low in others (where are the car manufacturers or the Apples or Samsungs, or Microsofts or IBMs or Googles). This means it can be quite volatile (could easily lose 40%+ in a year) and it may be worth noting that despite the good yield, it has underperformed other global indexes on a 'total return' basis, historically.

If you are looking for a more balanced portfolio of investee companies within the UK investment universe you would be better looking at investment trusts or active funds, IMHO, especially if income is of particular importance. Or look beyond the UK for a whole-world view (UK is well under 10% of total stockmarket capitalisation) - but in doing that, recognise that in other countries, dividend yields are typically lower for a variety of reasons and much of the return may come from growth.

There are dedicated funds and investment trusts which specifically focus on income yield if that is what you want, however if income is not the be-all and end-all for you, it is sensible to have a balance across company types and industry sectors and geographic regions. As you say, you probably have them in the ISA but if you are building up a separate pot, and will not be transferring money back and forth in between your ISA and non-ISA, it makes sense not to get such a specialist single market fund like a 100tracker.

stringer_bell

dunstonh wrote: »

I understand your reason for investing. Lots of people look to increment during periods of decline. Its a good thing to do. However, why FTSE100? Why not FTSE all share or FTSE250? Or UK Equity income (seeing as you like yield)?

I have lots of money invested in the 250 in my SIPP, and my ISA. It's hard to put forward my train of thought here, I'm only 31 and certainly won't be needing the money for a while, and I have done very well.

I have caught the investing bug, and drip feeding into the HSBC FTSE 100 tracker, when I see it dropping, seemed perfect sense. My thought is, 10k currently would earn me 100 pound.. 10k in that HSBC tracker, would earn me 300 pound, regardless of what the share price does, and I only see it going up from here ( I know it can go down )

I'm just sick of seeing my money not growing, and I keep delaying investing, as by the time I have decided, its time to topup my S&S ISA again.

My SIPP has a lot of funds in there, India, Biotech, Global technology. I can take that risk as I won't retire until 55, so about 24 years

My ISA is medium risk, with a lot of growth potential, as I don't see myself needing it anytime soon

With investing outside these wrappers, I have a feeling that I need to be super cautious, as this is coming from cash stores. I know my cash stores are safe, and its going into unknown territory

Sorry if this makes no sense at all

stringer_bell

bowlhead99 wrote: »

Yes, 3-5% is probably in the safe range in terms of not being ridiculously unsustainable.

5 is more at the top end - but is probably possible with an actively managed fund or investment trust that is deliberately targeting higher dividend payers, and in such cases you would expect them to have done their due diligence on the companies invested in, as to whether in their considered opinion the dividends will last or will face significant cuts. Who knows if they will be right - there is no such thing as certainty.

With the FTSE100 it has been yielding 3%+ for decades. It has also historically provided growth and income. It's probably unlikely to drop to just 1 or 2 percent. You would probably expect, for example, oil companies might cut back their dividends when the oil price is on the floor, but then again, the price of those shares has already fallen in anticipation so the percentage yield of dividend against the price may continue to be broadly the same.

However, it is worth noting that FTSE 100 is just a passive allocation to the largest companies that happen to be listed on the UK stock exchange and has high concentrations in certain industries (e.g. oil and gas, resources, pharmaceuticals, banks) and low in others (where are the car manufacturers or the Apples or Samsungs, or Microsofts or IBMs or Googles). This means it can be quite volatile (could easily lose 40%+ in a year) and it may be worth noting that despite the good yield, it has underperformed other global indexes on a 'total return' basis, historically.

If you are looking for a more balanced portfolio of investee companies within the UK investment universe you would be better looking at investment trusts or active funds, IMHO, especially if income is of particular importance. Or look beyond the UK for a whole-world view (UK is well under 10% of total stockmarket capitalisation) - but in doing that, recognise that in other countries, dividend yields are typically lower for a variety of reasons and much of the return may come from growth.

There are dedicated funds and investment trusts which specifically focus on income yield if that is what you want, however if income is not the be-all and end-all for you, it is sensible to have a balance across company types and industry sectors and geographic regions. As you say, you probably have them in the ISA but if you are building up a separate pot, and will not be transferring money back and forth in between your ISA and non-ISA, it makes sense not to get such a specialist single market fund like a 100tracker.

Thank you for the long and detailed post. I will start researching. Income isn't the be all and end all, but I consider it a nice " addon "

I'm thinking of it along the lines of interest, of course, I'd love a nice mix or income and growth, but from what I read around here, finding a good balance is difficult

jimjames

stringer_bell wrote: »

With investing outside these wrappers, I have a feeling that I need to be super cautious, as this is coming from cash stores. I know my cash stores are safe, and its going into unknown territory

Sorry if this makes no sense at all

If you are investing in the FTSE100 then that doesn't really tie in with being super cautious.

stringer_bell

does the FE risk score on trustnet mean anything? I presume the higher the number, the more higher the risk. I don't know whether its accurate though, or means anything in the real world?

dunstonh

stringer_bell wrote: »

does the FE risk score on trustnet mean anything? I presume the higher the number, the more higher the risk. I don't know whether its accurate though, or means anything in the real world?

It's useful but not great. It measures the current underlying assets and not the potential underlying assets. So, a fund with a flexible objective fund could currently be defensive and have a 30 score but has the potential to go aggressive and at that time it could have a 150 score.

on typical risk scale of 1-10 (1 = cash and 10 = highest risk mainstream investing) then a FTSE100 tracker would be 9.

stringer_bell

dunstonh wrote: »

It's useful but not great. It measures the current underlying assets and not the potential underlying assets. So, a fund with a flexible objective fund could currently be defensive and have a 30 score but has the potential to go aggressive and at that time it could have a 150 score.

on typical risk scale of 1-10 (1 = cash and 10 = highest risk mainstream investing) then a FTSE100 tracker would be 9.

I see, I would of thought maybe a 3-4 at best, if I was going for the 9 risk scale, I would of invested in something with better growth oppurtunities

Any reason why this is so risky? I would of thought investing in a single company, would be a risk 9-10, but a fund tracking a whole market, I thought would of been a safer option