Income Portfolio's

Sue58

Having just read about income portfolio's on another recent thread (withdrawal strategies), I thought this subject merited a separate thread.

At the moment I have a wealth preservation/cash fund and a 100% equity growth fund and am now looking at setting up an income fund before I go into drawdown sometime in the next year. I am looking at a portfolio of high yield investment trusts but I'm still also looking at various funds as well before making a final decision.

Would anybody holding income portfolio's like to share their preferences/portfolio's so that we can all hopefully learn from other people's choices whilst also continuing with our own research?

AnotherJoe

Based on my experience I'd say dont bother. I set one up as an experiment a couple of years ago, out of my three portfolios its been by far the weakest.

Including dividends last years performances (Oct 1 2017 - Oct 12018) of my three main portfolios were (from memory, I did post elsewhere here what they were)

Active 28%
Passive 14%
Income 2%

So I'd have been better off to have just used one of the former two or a mixture, and then sold units.

The only reason i haven't liquidated the income is that I dont know what I'd buy with the money instead just yet, and given the declines in their share/fund prices its possible they are at a point where they are now reasonable value so I'm going to give them another year.

Wildsound

The issue I have with income portfolios is that you compromise choice and diversification for the sake of chasing yield.

Total return and volatility should be the main focus and then building an income strategy around how you take a piece of the pie when required.

AnotherJoe

Wildsound wrote: »

The issue I have with income portfolios is that you compromise choice and diversification for the sake of chasing yield.

Total return and volatility should be the main focus and then building an income strategy around how you take a piece of the pie when required.

I agree and setting up my income portfolio was in retrospect a mistake though to be fair it was an experiment. Now those investments have fallen they are at least at a point i regard as reasonable value and unlikely to fall much more so i'm going to give it a year and then will sell up if they do no better this coming year comparatively.

dunstonh

I don't tend to use yield for income. Total return is the main thing. Although I may swing an income bias into the funds.

Instead, a focus on volatility level and total allows more control and provides for a fixed regular withdrawal at a sustainable level with around 18-24 months held in cash to cover periods of downturns to avoid selling units when significantly negative.

Thrugelmir

I would caution against chasing/focussing on high yield this late in the cycle. Target sustainable yield.

kidmugsy

AnotherJoe wrote: »

Based on my experience I'd say dont bother. I set one up as an experiment a couple of years ago, out of my three portfolios its been by far the weakest.

What absurd reasoning - mine hasn't worked in a test period of all of a mighty two years, therefore don't do it.

You might as well recommend buying premium bonds on the grounds that you got a nice win this month.

Thrugelmir

AnotherJoe wrote: »

I agree and setting up my income portfolio was in retrospect a mistake though to be fair it was an experiment. Now those investments have fallen they are at least at a point i regard as reasonable value and unlikely to fall much more so i'm going to give it a year and then will sell up if they do no better this coming year comparatively.

Reinvestment of the income is the key. Expectations are too high if you think capital values will be maintained consistently while high levels of income are achieved. Historical data of 5% is based on such a policy. Without reinvestment growth is a paltry 0.5% over the last 100 plus years.

seacaitch

Sue58 wrote: »

At the moment I have a wealth preservation/cash fund and a 100% equity growth fund and am now looking at setting up an income fund before I go into drawdown sometime in the next year.

Income-focused portfolios are psychology appealing but they may involve drawbacks, such as compromising diversity or quality, as other posters have pointed out.

What is the appeal to you of the income portfolio you're considering?

Sue58

seacaitch wrote: »

Income-focused portfolios are psychology appealing but they may involve drawbacks, such as compromising diversity or quality, as other posters have pointed out.

What is the appeal to you of the income portfolio you're considering?[/QUOTE

I'm not sure I will bother setting up a separate income portfolio after reading some of the replies.

I initially thought that an income portfolio with quite high yields would guarantee some income but obviously this would be at the expense of growth.

AnotherJoe

kidmugsy wrote: »

What absurd reasoning - mine hasn't worked in a test period of all of a mighty two years, therefore don't do it.
You might as well recommend buying premium bonds on the grounds that you got a nice win this month.

unfortunately I don't have an unlimited amount of time to try the experiment. If under the exact same conditions A and B make a good return and C makes a lousy one, and if that's repeated under different conditions next year (which presently is looking poorer economically so a good test ) then that's good enough for me.
The alternative is hold it for 50 years and ask my descendants to hold a seance and let me know how it went.