Tracker fund yield - is higher better?

[Deleted User]

Much clearer on this now, thanks.

The ideal fund would have high yield, high current and future capital growth but with low risk and good diversification. Fees would also be at a minimum.

bostonerimus

Deleted_User wrote: »

Much clearer on this now, thanks.

The ideal fund would have high yield, high current and future capital growth but with low risk and good diversification. Fees would also be at a minimum.

......and no risk to your capital. Of course it's a balancing act within the parameters of your portfolio.

Audaxer

Deleted_User wrote: »

Much clearer on this now, thanks.

The ideal fund would have high yield, high current and future capital growth but with low risk and good diversification. Fees would also be at a minimum.

Some of the funds with the highest returns are growth funds with 0% yield, but are likely to be high risk (volatility). These type of funds could see a 50% drop in value in an equity crash, so you need to be happy to take that risk, or have that fund are part of a more balanced portfolio along with lower risk funds.

Thrugelmir

Deleted_User wrote: »

The ideal fund would have high yield, high current and future capital growth but with low risk and good diversification. Fees would also be at a minimum.

If only investing were that easy...........

Alexland

Yup if you find that fund let us know!

EdSwippet

le_loup wrote: »

If the guy - talking about an American situation - needs 60 pages to get his theory across, then a simple person - like myself - needs no more than I've posed above.

Then here is the same thing, stated in one or two pages:

Why do shareholders believe so strongly that a $1 dividend is preferable to a $1 capital gain? Meir Statman looked at this question in a 1984 article called Explaining Investor Preference for Cash Dividends, coauthored by Hersh Sheffrin. He also reviews the idea in his new book, What Investors Really Want, pointing out that receiving $1,000 in dividends is no different from selling $1,000 worth of stock to create a “homemade dividend.”

Even when this idea is explained to people, most refuse to accept it. Statman suggests that it comes down to a cognitive bias called mental accounting. Investors categorize $1,000 in dividends as income that they will happily spend, but the idea of selling $1,000 worth of stock is “dipping into capital,” which causes them great anxiety. This idea is deeply ingrained in many investors, but it is an illusion, because a company that pays a dividend to shareholders is depleting its own capital.

Or even more succinctly:

... Meir Statman writes, “a dollar labeled dividends is as green as a dollar labeled capital, so rational investors are indifferent between the two.”

Audaxer

ColdIron wrote: »

The notion of selling down regardless of market conditions would give me sleepless nights, I want a pleasant retirement.

I agree with the above, but if equity income funds continue to pay dividends during an equity crash, and these dividends are not reinvested, would these funds generally drop in value more than similar growth funds?

le_loup

EdSwippet wrote: »

Then here is the same thing, stated in one or two pages:

Or even more succinctly:

This point struck me as all telling:

"This idea is deeply ingrained in many investors, but it is an illusion, because a company that pays a dividend to shareholders is depleting its own capital."

Company managers are very happy to deplete the capital of the organisations they run by spending the capital on their own aggrandisement, in particular but not restricted to, taking over other companies to the detriment of the long term health of their companies.

firestone

We know people pick funds for different reasons and that can be determined by age,risk level,an IFA, could even be whats in vogue at the time as seen over the last decade from EM,Absolute return,trackers,Bio tech among others(bet the bitcoin Etf is hot this week!)
But the idea of "mental accounting" and fear of "dipping into gain" will be a strong one for some people.While the past is no guarantee is true,people will buy a dividend hero or solid income fund hoping for peace of mind.They get steady income or can compound it, but the idea of selling shares/units that have gained will be followed by the thought what happens if the market goes down for the next 1 or 5 or 10 years you will have less shares to carry on with,take longer to make up your loss and may even need to sell more so in someways not all Dollars are as Green

Thrugelmir

le_loup wrote: »

This point struck me as all telling:

"This idea is deeply ingrained in many investors, but it is an illusion, because a company that pays a dividend to shareholders is depleting its own capital."

Company managers are very happy to deplete the capital of the organisations they run by spending the capital on their own aggrandisement, in particular but not restricted to, taking over other companies to the detriment of the long term health of their companies.

Different times to 1984. Nowadays share incentive schemes abound. Buybacks inflate the price of the remaining stock in issue. Often made with borrowed money. Financial engineering to whose benefit?