DIY or IFA?

dunstonh

Audaxer wrote: »

Thanks dunstonh. Regards rebalancing of income funds, let's say for example you had a good dividend paying fund/IT which shoots up a lot in value and you rebalance by selling some of your gains in that fund to buy into one of your other poorer performing funds/ITs. You would receive a lower amount of future dividends from the fund your are selling from, and might not be gaining as much in dividends from the fund you are buying into if it's not as big a dividend payer. Am I right in thinking the answer to that is take your income based on total returns rather than on the amount of dividends alone?

If the unit price has "shot up" then the yield may well reduce.

If something has gone up like that, it can go down just as quick. An income portfolio is unlikely to be 100% equity. So, the lower risk areas would not have gone up as much. So, you protect some of those gains by moving them into the lower risk areas.

Next rebalance, the equity content could have gone done (and yield gone up) and you move some out of the fixed interest sector into the equity.

Also, remember for most people needing an income, relying 100% on yield is not the most common method. Its viable and lots of people do it but total return is by far the most dominant method. Keep your cash float enough to cover 12-24 months income. If a crash occurs, you let the cash float fall and replenish after it has gone back up.

Audaxer

dunstonh wrote: »

Also, remember for most people needing an income, relying 100% on yield is not the most common method. Its viable and lots of people do it but total return is by far the most dominant method. Keep your cash float enough to cover 12-24 months income. If a crash occurs, you let the cash float fall and replenish after it has gone back up.

Thanks. If you take income from total returns, is there any point in having an income/dividend-generating portfolio as you would presumably do the same with a growth portfolio?

dunstonh

Audaxer wrote: »

Thanks. If you take income from total returns, is there any point in having an income/dividend-generating portfolio as you would presumably do the same with a growth portfolio?

Its personal choice. No right or wrong. In many cases, it ends up being a combination i.e. yield paid to cash account. Cash account holds 12-18 months of withdrawals. When you rebalance the cash account, you may or may not sell some units when rebalancing to refloat it. If the yield is say 2.5% and the income draw is 3.5% then you need a bit of both.