Monthly Income from 120K - Monthly Income Funds

Malthusian

Eco_Miser wrote:

I use ITs as part of my portfolio for two reasons, and the first is the opposite of that. I would choose a level of income just sufficient for my needs (with no chance of depleting the portfolio), instead of taking full advantage of the dividends generated, and actually spending on occasional luxuries.

If you don't take full advantage of the dividends then what do you do with the surplus? Reinvest? If so this is basically what I was advocating.

The second reason is that everything is automatic, with no need to consider how much to sell.

Same applies to a fixed withdrawal.

Investment trusts, like all actively managed funds, are expensive by modern standards. There has to be a better reason for spending an extra 0.5% per annum on active management than wanting the fund manager to decide how much income you get.

Audaxer

Malthusian wrote: »

Same applies to a fixed withdrawal.

Malthusian, just to clarify, do you mean that the dividends from your portfolio are paid into the cash part of your S&S ISA, and you have a fixed withdrawal set up from the cash to pay into your bank account each month and then you re-invest what is left of the dividends?

Malthusian wrote: »

Investment trusts, like all actively managed funds, are expensive by modern standards. There has to be a better reason for spending an extra 0.5% per annum on active management than wanting the fund manager to decide how much income you get.

Do you have only passive funds in your portfolio?

Linton

There are many reasons for my choosing to use the natural income from shares and funds as a tranche of a multi-portfolio investment strategy.

1) everything is automatic
2) no need to worry about long term sustainability of % drawdown.
3) diversification of sources of income
4) diversification of assets as sectors that produce income differ from those that lead to capital growth.
5) ability to tune overall asset allocation to meet needs
6) dividend income tends to rise with inflation
7) dividends are far less volatile than capital values.

Eco_Miser

Malthusian wrote: »

If you don't take full advantage of the dividends then what do you do with the surplus? Reinvest? If so this is basically what I was advocating.

To be clear, this

I would choose a level of income just sufficient for my needs

is what I would do with a fixed withdrawal - I'm too cautious. With more money than I need coming into my bank account most months, I am able to spend it, knowing I've still got all my capital. It's a psychological thing.

Malthusian wrote: »

Same applies to a fixed withdrawal.

Investment trusts, like all actively managed funds, are expensive by modern standards. There has to be a better reason for spending an extra 0.5% per annum on active management than wanting the fund manager to decide how much income you get.

There is. 30+ years ago in my first retirement, I was withdrawing a fixed 5% as described above by dustonh, and not getting 5% return, so seeing my capital shrink. I cancelled that arrangement, and vowed never to blindly withdraw fixed amounts again. Just spending the natural income feels much safer.

Linton

Malthusian wrote: »

.......

Investment trusts, like all actively managed funds, are expensive by modern standards. There has to be a better reason for spending an extra 0.5% per annum on active management than wanting the fund manager to decide how much income you get.

That may be true for ITs that invest mainly in dividend generating FTSE100 companies. However there are plenty of income ITs in sectors such as...

- small company equity income and bonds
- private equity
- infrastructure
- REITs and other UK property
- foreign property
- global higher dividend paying equity (mainly Europe and Far East)
- EM government bonds
- debt

which would be difficult to access any other way than paying a fund manager.

Rymo_2

Thanks all for taking the time to respond / put forward your thoughts. I feel there are no glaring problems from what I've read. I am aware that there is quite a uk focus, but not too much in my opinion and i'm ok with this.

I like the trickle of monthly income and am 9K up on capital at the moment which feels good (although I am aware this could disappear in a moment and turn well negative).

I will increase my cash buffer and perhaps look at some IT's for the future.

I was hoping no one was going to post "You've done WHAT!!!!" and they haven't.

Thanks again to all.

AnotherJoe

The only thing I'd add is you have focused on monthly funds because you want monthly income but as said by others some quarterly funds (or even biannual) will also work and then you arent being restricted to such a narrow range of investments / investment strategies which are to a certain level constrained in a monthly fund.

You might be turning down higher income because of this, there might be (say) a quarterly fund paying 4% but you've settled for a monthly paying 3% because you didnt even consider anything that wasnt monthly.

Having a cash buffer would help there as well.

I wouldn't go mad and rip it all up but I'd look at wider sources than just monthly based pooled investments and phase in over time.

You could also note down for each fund the top ten holdings, will only take half an hour, I suspect you'll find a few where they are practically identical. In which case replace one of those with either an IT, a different sector, and dont be restricted to monthly

Malthusian

Audaxer wrote: »

Malthusian, just to clarify, do you mean that the dividends from your portfolio are paid into the cash part of your S&S ISA, and you have a fixed withdrawal set up from the cash to pay into your bank account each month and then you re-invest what is left of the dividends?

I'm not drawing income from my portfolio, but that is what I would do if I was.

Do you have only passive funds in your portfolio?

No, but I only use active funds for sectors where index-tracking is undesirable or impractical (e.g. smaller companies and commercial property). The sectors investment trusts predominantly invest in - UK and global equities and fixed interest - can all be accessed much more cheaply. I'm aware there are exceptions like the ones Linton listed but I was thinking of the ones that income investors tend to buy.

Sally57

Sue58 wrote: »

Do you think global investment trusts would be more useful such as Bankers, Caledonia, Brunner etc instead of just having UK IT's?

Currently I do feel global IT's are a better bet then UK IT's mainly because of less UK exposure but I may be wrong, however you have to follow your beliefs.