Invesco Perpetual Income & High Income funds

maypole

Perhaps I just jumped on the band wagon and didn't research! don't really know what open end investment means ( oeics)

jamesd

EdInvestor wrote: »

long term capital growth is a bonus.

Two thirds of the return from HYP1 has been from capital growth. That's not a bonus, it's a core part of the total return delivered. It's also a core part of the return of the competitors, which aren't the entirely dissimilar low risk guaranteed product, the annuity, or property.

Yield is a percentage of the current capital, not of the original capital. Still, if you want to compare with original capital, assuming 3.1% of current value for the Invesco Perpetual fund, here's how it looks:

Year	HYP1	IP If 3.1%
2002	4.61	3.10
2003	4.24	2.77
2004	4.25	3.36
2005	4.70	4.07
2006	5.48	5.16
2007	n/a	6.57

This really shows up the effect of the falling yields based on current value of the HYP, compared to the way the consistent yield of the fund is causing its yield compared to original value to grow as the capital grows.

xxMandyxx

I dont mean to be ignorant but what is a UK equity income fund? _ im just trying to learn about investments etc but its all a little confusing!

thanks
xxmandyxx

EdInvestor

xxMandyxx wrote: »

I dont mean to be ignorant but what is a UK equity income fund?

It's a fund that invests in UK shares which pay decent dividends - the divis provide the income, similar to interest on a bank account.Generally these tend to be blue chip, household name companies.The funds tend to perform well in downturns (so you lose less if the market goes down) and in recent years have outperformed in good times as well.:)

These shares/funds are particularly useful to people who want stable income from their investments (eg in retirement). It's helpful that there is no tax to pay on dividend income for basic rate taxpayers as the divis come with a crediyt that takes care of it.

Historically the returns on shares are equivalent to three factors: the dividend yield, the rate of economic growth and the rate of inflation. So IMHO it doesn't make sense to invest in shares that don't pay dividends, as you're missing out typically on a third of the returns and possibly as much as half if you go for higher yield shares.

EdInvestor

jamesd wrote: »

...if you want to compare with original capital, assuming 3.1% of current value for the Invesco Perpetual fund, here's how it looks:

Year    HYP1    IP If 3.1%
2002    4.61    3.10
2003    4.24    2.77
2004    4.25    3.36
2005    4.70    4.07
2006    5.48    5.16

Nice to see a consistent outperformance by the HYP vs the top performing equity income fund again

jamesd

EdInvestor wrote: »

Nice to see a consistent outperformance by the HYP vs the top performing equity income fund again

The fund could have paid out an average of 1,100 a year more than the HYP and still have the same capital value as the HYP today. It's comparable to the HYP plus a free savings account emergency fund with 6300 in it so far.

The fund has outperformed the HYP in total returns so there's no "again" to be had unless you choose to ignore most of the picture: the capital growth and the ease of taking the difference in yield from the capital part of the total return. After doing that the fund has still returned 6300 more than the HYP at the beginning of 2007.

jamesd

EdInvestor wrote: »

Historically the returns on shares are equivalent to three factors: the dividend yield, the rate of economic growth and the rate of inflation.

You missed one: the relative growth (or decline) in the value of the company compared to others. It's what turns a company like Google from a dorm room experiment to a company worth billions.

EdInvestor wrote: »

So IMHO it doesn't make sense to invest in shares that don't pay dividends, as you're missing out typically on a third of the returns and possibly as much as half if you go for higher yield shares.

You're not losing the third piece. It's being reinvested in the company and growth of the business.

If you think not paying dividends is bad, take a look at Berkshire Hathaway, which paid dividends in just one year if I recall correctly and grew by 3500% from start to 2005, over 20% a year on average. Warren Buffett doesn't believe in paying dividends and the result of reinvesting the money in the business instead shows in the huge out-performance compared to the S&P500 index.

EdInvestor

Berkshire Hathaway is hardly a representative listed company.As was very clear at the end of the century ,much of the so-called gains in "growth" companies where just a mirage.