Income Portfolio's

MK62

Thrugelmir wrote: »

CTY trades at a premium to NAV. This includes cash and accrued dividends due to the Trust.

True, but the NAV only influences the share price, it doesn't set it.
It's entirely possible for the NAV to increase while at the same time the share price falls, narrowing the premium (or widening the discount).

I'd agree that in a rational world, any increase in NAV would/should trigger an increase in share price, but the stock market is anything but......

Thrugelmir

MK62 wrote: »

True, but the NAV only influences the share price, it doesn't set it.

Buying at a premium is something I avoid if at all possible.

Audaxer

Thrugelmir wrote: »

Buying at a premium is something I avoid if at all possible.

If I was buying an IT for dividend income, buying at a small premium wouldn't bother me as I'd have no intention of selling it.

Thrugelmir

Iain_For wrote: »

Not to negate the importance of sequence return risk, but chasing yield may well result in a less diversified, higher risk portfolio. UK equity income fell 47% in the financial crisis relative to global equities falling 37%.

Interestingly as at the 22nd October. The MSCI index was up 5% year to date. Dig into the numbers and 58% of the 2,767 shares were actually in bear territory. Having fallen over 10% this year. Seems as if the US market is holding the index up. Although today there was a correction it seems.

Audaxer

Just came across this HL article about taking natural yield as a sustainable drawdown strategy:
https://www.hl.co.uk/news/articles/drawdown-living-off-the-natural-yield?cid=halDM45349&bid=195578157&e_cti=7642566&e_ct=T&utm_source=AdobeCampaign&utm_medium=email&utm_campaign=RE380_Investing%20in%20drawdown%20-%20round-up_Retirement&theSource=RE380&Override=1
I know total return is another valid strategy, but if you can afford to live off natural yield it seems a reasonably good choice to use that as a strategy.

dunstonh

Audaxer wrote: »

Just came across this HL article about taking natural yield as a sustainable drawdown strategy:
https://www.hl.co.uk/news/articles/drawdown-living-off-the-natural-yield?cid=halDM45349&bid=195578157&e_cti=7642566&e_ct=T&utm_source=AdobeCampaign&utm_medium=email&utm_campaign=RE380_Investing%20in%20drawdown%20-%20round-up_Retirement&theSource=RE380&Override=1
I know total return is another valid strategy, but if you can afford to live off natural yield it seems a reasonably good choice to use that as a strategy.

natural yield is a strategy but it has pros and cons. Limiting yourself to yielding investments may harm diversification and we only have to recall how the credit crunch decimated high yield portfolios.

coastline

Audaxer wrote: »

Just came across this HL article about taking natural yield as a sustainable drawdown strategy:
https://www.hl.co.uk/news/articles/drawdown-living-off-the-natural-yield?
I know total return is another valid strategy, but if you can afford to live off natural yield it seems a reasonably good choice to use that as a strategy.

Similar to my previous post as the FTSE has a track record of 3% plus yield which is a well documented drawdown rate. The index itself or the All Share doesn't get the thumbs up on here as its gone near to nowhere since the year 2000 apart from dividends. During the dotcom boom the index became distorted with Large Cap companies on high P/E values. I remember Vodaphone representing over 15% of it at one point. This distortion has gradually eased and many previously high rated companies are forecast to be around P/E 10-12 which is good value.

Examples.. they aren't the best but you can see the picture emerging. Falling P/E ratios over several years which I believe should give the index a much better base.

https://www.share.com/investments/shares/111/bt-share-price

https://www.share.com/investments/shares/103/bat-share-price

https://www.share.com/investments/shares/1621/sse-share-price

https://www.share.com/investments/shares/217/severn-trent-share-price

After saying that the FTSE hasn't always lagged as badly as its made out when comparing with a global tracker. Set the timescale to 10 years and its only in the last 3 years where its failed. Even from Jan 2000 to the present its a similar story.

https://www2.trustnet.com/Tools/Charting.aspx?typeCode=NM990100,NUKX

Audaxer

dunstonh wrote: »

natural yield is a strategy but it has pros and cons. Limiting yourself to yielding investments may harm diversification and we only have to recall how the credit crunch decimated high yield portfolios.

I agree an income portfolio may not be as diversified as a growth portfolio, but looking at the FTSE All Share chart in the article, the natural yield income from that index seems to have held up quite well during the credit crunch.

Thrugelmir

coastline wrote: »

After saying that the FTSE hasn't always lagged as badly as its made out when comparing with a global tracker. Set the timescale to 10 years and its only in the last 3 years where its failed. Even from Jan 2000 to the present its a similar story.

Paint a picture and the outcome becomes self fulfilling.

As you said.

The index itself or the All Share doesn't get the thumbs up on here as its gone near to nowhere since the year 2000 apart from dividends.

Dot Com boom was the same. Investors chasing a pot of gold at the end of the rainbow. Investors like to act in the safety of herds. Provides a comfort blanket. Head for the exits. Until the next fad emerges.