Retirement portfolio for someone in their 60's

chucknorris

cogito wrote: »

The dividend yield is of no relevance. It's the total return that matters.

It is relevant, I think that you are not considering the whole picture, in a downturn the higher yielding etf Vhyl that I mentioned would be considered more defensive, and probably less likely to fall as much, and of course in the interim period more dividend income would have been paid. Because I am quite wealthy, and I don't need to make more money (I can't actually spend what I have now), I am therefore more interested in equities with defensive rather than growth qualities, so I would consider the higher yielding Vhyl more suited to me than the Vwrl etf. Because I am more interested in protecting my wealth, but that doesn't necessarily mean that I want to avoid equities altogether in favour of some other form of investment.

Linton

cogito wrote: »

The dividend yield is of no relevance. It's the total return that matters.

Sorry, as a retiree I find good dividend yield essential. Having a diversified spread of dividend paying investments in an S&S ISA provides a steady tax free income throughout the year with zero effort except for an annual checkup to replace holdings where necessary. The normal fluctuations of the stock market make very little difference. The alternative of having to sell individual holdings on a monthly basis having decided which ones to sell is far worse.

Also one needs diversification of income sources. So as well as having a 6-figure income portfolio with a yield of about 6% I also run a large growth portfolio. The two portfolios have a significantly different asset allocation in terms of geography and sectors. Running them as two separate portfolios enables control of the overall characteristics by moving money from one to the other. A degree of fine tuning that would be very difficult were one to have only one portfolio with a focus on total return.

Your statement may be right in the accumulation phase where long term growth is the single objective but decumulation is rather more tricky having to balance a steady income in good times and bad with long term inflation protection and possibly growth beyond that.

atush

It is relevant as during poorer periods in the market you would be taking the income and not selling units. So the value of said units is not as important. Just like the value of your house isnt important if you are not selling it.

The accumulation period is far different. The total return is what you look at.

Audaxer

Linton wrote: »

Sorry, as a retiree I find good dividend yield essential. Having a diversified spread of dividend paying investments in an S&S ISA provides a steady tax free income throughout the year with zero effort except for an annual checkup to replace holdings where necessary. The normal fluctuations of the stock market make very little difference. The alternative of having to sell individual holdings on a monthly basis having decided which ones to sell is far worse.

Also one needs diversification of income sources. So as well as having a 6-figure income portfolio with a yield of about 6% I also run a large growth portfolio. The two portfolios have a significantly different asset allocation in terms of geography and sectors. Running them as two separate portfolios enables control of the overall characteristics by moving money from one to the other. A degree of fine tuning that would be very difficult were one to have only one portfolio with a focus on total return.

Hi Linton, that's very interesting as I'm also retired and looking to transfer a fairly large investment into an income portfolio, and would love to be able to get a 6% annual yield. I had been looking for hopefully growing regular income with some capital growth through Investment Trusts as from what I read they would provide a more regular income even in bad times? To get a good level of diversification, I thought I would be doing well to get a 4% annual yield.

As I'm still a bit of a novice, I'd be really interested to know if:
1) Your income portfolio consists of open-ended funds or Investment Trusts or a mix of both?
2) Is such a high yield at the expense of any capital growth?
3) Does it contain a much higher proportion of UK Equity Income than say a growth portfolio, as I understand that UK Equity Income generally produces higher yields that International Equites?
4) To get such a high annual yield, do you need a particularly high risk portfolio?
5) How many funds/investment trusts are in the income portfolio, and is it a fixed portfolio or do you change funds/ITs as their performance/yields change?

Thanks

chucknorris

atush wrote: »

It is relevant as during poorer periods in the market you would be taking the income and not selling units. So the value of said units is not as important. Just like the value of your house isnt important if you are not selling it.

The accumulation period is far different. The total return is what you look at.

That's another good point that I overlooked. I'm beginning to think that I should forget about Vanguard's VWRL ETF and just go with the higher yielding VHYL ETF.

Linton

Audaxer wrote: »

I'd be really interested to know if:
1) Your income portfolio consists of open-ended funds or Investment Trusts or a mix of both?
2) Is such a high yield at the expense of any capital growth?
3) Does it contain a much higher proportion of UK Equity Income than say a growth portfolio, as I understand that UK Equity Income generally produces higher yields that International Equites?
4) To get such a high annual yield, do you need a particularly high risk portfolio?
5) How many funds/investment trusts are in the income portfolio, and is it a fixed portfolio or do you change funds/ITs as their performance/yields change?
...

1) A mixture of directly held shares (32%). IT (12%), Private Equity fund (8%), OEICs/UTs(48%)
2) Certainly at the expense of much of the capital growth. There is no deliberate attempt to increase the capital value and it may be necessary in the future to replenish the income portfolio from the growth portfolio as part of overall rebalancing.
3) The portfolio is about 62% equity, 26% bonds with the rest in cash and "others". The UK represents about 50% of the equity with the rest mainly in Europe and the Far East. However significant amount of the bonds are in the USA. The Far East likes dividends. The USA is bad for dividends because of their tax system.
4) No - with only 60% equity and a focus on diversification the portfolio is certainly less risky than a pure equity one. The UK equity is about 50% FTSE250 midrange companies.
5) I hold 19 individual shares, 6 OEICs, 1 IT and 1 private equity fund in the income portfolio. The portfolio is intended to be fixed. Once a year I will check the Yields and replace anything that falls below about 4%. Typically this would be 1 or 2 of the directly held shares. Individually held companies may fail (only one so far) and a new one added. Recently following the Brexit vote I increased the portfolio by 40% almost entirely invested abroad. The aim was to reduce the income to 50% UK to provide better security for the future.

stoozie1

Hi,

I have nothing half as useful as all the regular super savvy forum members who are already advising you, but I wondered about your wife's position on retirement, as from your post about her tax situation earlier makes me think she has a smaller income and pension than you.

Would it be worth rebalancing that a bit?

You look to be paying tax on the rental property in retirement. Would transferring the property to your wife alleviate any of that?

Linton

In addition to Post 37(4)

On risk: the income from an income portfolio is much safer than the capital value. As long as the bond issuer remains solvent bonds will continue to pay out the same amount, and to some extent that applies to dividends. Companies make dividends on a pence/share basis so the actual income does not vary with the share price. It's the yield % that changes.

brewerdave

As per post #27 - what are you planning to happen with your wealth after death as it seems (to me anyway:)) that you have more than enough to cover your needs already?
I'm nearer 70 than 60 and my wife and I are living comfortably on our relatively modest DB scheme payouts. We are deferring our SPs for another year or two, and have no immediate intention of drawing on my SIPP or cashing in our existing ISAs.
My plan is to leave as much as possible to my children/grandchildren without scrimping too much.
Surely your investment strategy should reflect this "final" position?

kidmugsy

atush wrote: »

The accumulation period is far different. The total return is what you look at.

That's a crucial point. How you invest during your working life - the accumulation period - may be quite different from how you invest in retirement. That is not only the 'decumulation' period, but the period when you know that you will eventually face cognitive decline and, perhaps, will die and leave a widow with no understanding of, or previous interest in, finances.