Investment Trust choices

Thrugelmir

bcfclee27 wrote: »

Thanks for the warning Audaxer, yes my risk level has definitely increased as I have researched and come to realise that I would definitely ride out a crash.

Companies themselves do go bust / suffer permanent loss of capital value in a down turn. Crashes aren't just mathematical events where eveything returns to normal in time. There are winners and losers in the real world.

Audaxer

atush wrote: »

As we are going to move from accumulation to decumulation in a few years both Bankers and Scottish mtg are on my to buy list as and when we are setting up for income over acc.

I'm no expert, but the yield on Scottish Mortgage was very low when I last looked, so I wouldn't have thought it would be very good for deaccumulation if you are looking for the income from its dividends.

atush

True but not all funds will be for the yield.

Some will be growth and others capital protection. Again, it will be diversified like during the accumulation phase.

Audaxer

atush wrote: »

True but not all funds will be for the yield.

Some will be growth and others capital protection. Again, it will be diversified like during the accumulation phase.

Fair enough. Interested to know what system you use for taking income from total return? That's the bit I think I would find difficult - knowing when to sell capital gains.

A_T

Audaxer wrote: »

Fair enough. Interested to know what system you use for taking income from total return? That's the bit I think I would find difficult - knowing when to sell capital gains.

presumably one sells when one needs the cash

bowlhead99

A_T wrote: »

Audaxer wrote: »

Fair enough. Interested to know what system you use for taking income from total return? That's the bit I think I would find difficult - knowing when to sell capital gains.

presumably one sells when one needs the cash

Yes; as a result of some funds generating and paying out income and other funds not, and the various parts of your portfolio growing or shrinking and different relative speeds in different periods, you are generally going to have your portfolio move out of 'balance' (from your ideal ratio of holdings) from time to time.

So when one wants or needs to access cash from the portfolio that hasn't been received as income, such that something needs to be sold, the 'correct' thing (or combination of things) to sell is the asset (or combination of assets) that would reduce the overweight that has arisen in certain parts of your portfolio as of that point in time.

The overweight might not have arisen as a result of a certain fund(s) doing particularly well and growing spectacularly - maybe just other funds performing badly, or just being relatively lower risk so they don't grow as much, or whatever. But if you are drawing out cash on a monthly or quarterly or semi annually or annual or ad hoc basis, you have an opportunity to 'fix' or bring your portfolio back to target that portfolio, or at least make inroads toward doing so.

atush

Audaxer wrote: »

Fair enough. Interested to know what system you use for taking income from total return? That's the bit I think I would find difficult - knowing when to sell capital gains.

Not using it, so not there yet lol.


Simplistcally it will depend on final mix of investments. harvesting income from income funds, bonds etc, and perhaps reinvesting income with growth ones etc.

in general will have a large cash fund and will draw from both income and growth ones in good years, and income ones in middling ones and none when markets crash. Obvs things are still in the planning stage.

Audaxer

atush wrote: »

in general will have a large cash fund and will draw from both income and growth ones in good years, and income ones in middling ones and none when markets crash. Obvs things are still in the planning stage.

Thanks, I am planning to keep a fairly big cash fund as well, and top it up when necessary. Seems easier just with dividends, but I know the view now is best to use a total return approach like you are planning. Just wondering if the normal system would be to take gains at the end of each year, e.g. if your portfolio has increased by say, 6% over the year, draw say, 3.5% income from dividends and selling some capital gains to replenish your cash account(s), and then pay yourself a regular monthly sum from the cash account(s)?

Sue58

A_T wrote: »

In performance terms they pretty much all are apart from SMT and LTGE.

Yes, the L&G tracker does comes very close to Bankers so maybe it is a closet tracker but it is managed by a respected long term manager.

bowlhead99

Sue58 wrote: »

Yes, the L&G tracker does comes very close to Bankers so maybe it is a closet tracker but it is managed by a respected long term manager.

A "closet tracker" is a somewhat derogatory term for an active fund run by a lazy manager that just pretty much follows an index while charging you active management fees for the privilege.

Looking individually at the years 2013, 2014, 2015, 2016, 2017 it doesn't seem to be a "closet tracker" at all, giving a result that varies quite a bit from what the L&G index is doing.

Ignore Scottish Mortgage on the graph which has stretched out the scale and made the graph less usable to review L&G vs Bankers. Just zoom in to the individual years and imagine you had £100 invested at the start of one of those years in both L&G and Bankers and what % gain or loss you would get over the next 12 months. The relative returns are all over the place.

2013 Bankers 28% vs LG 22%
2014 Bankers 3% LG 12%
2015 Bankers 11% LG 4%
2016 Bankers 14% LG 30%
2017 Bankers 29% LG 13%

L&G being a market-cap based developed-world-ex-UK index has approaching 60% of its equities in the USA and nothing in the UK or emerging markets. While Bankers has under 30% in USA and over 25% in the UK, with a small amount of emerging markets exposure. So, they don't do the same thing at all, and when in 2016 a dollar became worth 20% more pounds (67p to 81p) the L&G fund with its massive dollar exposure outperformed Bankers significantly, an effect which would have contributed to a bit of a reversal the following year.

So, Bankers is nothing like buying the L&G developed world ex-UK index, even if by coincidence one has returned 86% and the other 87% over the five years to today; in the individual years the performance differential was +7%, -9%, +7%, -16%, +16%. To look at a chart where its numbers have been squashed together with another fund into the bottom half of the picture and say "maybe it is a closet tracker" is the laziest analysis in the world, or perhaps just throwing out buzzwords without knowing what they mean.