Income Portfolio's

enthusiasticsaver

About 30% of our portfolios are invested in monthly income funds and are currently giving around 4.1% annually. We chose multi asset monthly distributions funds Artemis monthly distribution and Premier Multi asset monthly income funds. They subsidise our pensions and saves us having to liquidate units. We chose multi asset rather than equities to minimise volatility.

LHW99

I have "income biased" our portfolio, and currently any income is reinvested. I don't aim for high income, but aim for around 3.5% overall, with some capital growth. That's because I'm not expecting to need a regular income from the investments for some years - more an occasional top-up as we have enough SP / DB income between me / my OH for normal living.

Linton

Sue58 wrote: »

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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.

Yes, an income portfolio provides a fairly safe steady income at the expense of some growth. Which for many retired people is precisely the compromise that is most appropriate for their situation. If they focus totally on growth, people needing income to finance their expenditure will be badly hit in a downturn. Plus the type of investments you would choose for growth are those that will suffer most in a downturn. An income portfolio running alongside one chasing growth provides very useful diversification. It isnt a replacement for a growth one, they work together.



A further advantage of an income portfolio is that there are no ongoing decisions to be made beyond the annual review. The money just turns up in your current account fairly steadily throughout the year automatically at no cost. With a growth portfolio each cash drawdown requires work to determine what to sell.



Managing your finances once you are retired is very different to that during accumulation, different priorities apply.

Thrugelmir

Sue58 wrote: »

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.

Where's the dividing line for you between income and growth in terms of yield?

Is your aim is to draw an income from your investments while maintaining the capital value?

Amazon has had an exponential rise as a growth stock. However has never paid a dividend. Can it continue to increase in value at the same rate? General Electric once dominated the US landscape. Being the world's most valuable company in 2000. Now in serial decline. Companies rise and fall at a faster rate than many imagine.

Not wishing to discourage you from investing in income stocks. Merely highlight the challenges whatever path you choose. Entering drawdown is potentially a life changing decision. Getting it wrong could prove to be very expensive if it does go wrong.

Audaxer

Although I understand what other posters are saying about total return, I don't think there is anything wrong with having an income portfolio. I created one about a year ago and selected funds that mainly focused on income and some capital growth. I was not looking for the highest yield - just an average yield of around 4% so that I would hopefully get some growth as well. I chose UK Equity Income funds (including one IT), Global Equity Income funds, an Asian Equity Income fund and some Strategic Bond funds with a good history of returns over 10 years where possible. Overall it is about 57% equities, 43% bonds.

I also have VLS60 and comparing portfolios on Trustnet recently, my income portfolio had a better 5 year total return than VLS60, so I don't agree you can't also get growth with a medium risk income portfolio.

I'm not taking the dividends at present, but over the past year where growth hasn't been great on either portfolio, if I'd need the income I'd rather have taken the dividends from the income portfolio than sell VLS60 units.

TBC15

dunstonh wrote: »

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.

What period of time do you regard as regular?

What constitutes significantly negative?

TBC15

I’m sure Terry put this income v growth thing to bed some time ago.

Thrugelmir

Audaxer wrote: »

with a good history of returns over 10 years where possible.

A historical period with no prior precedence. QE reversal is uncharted water.

Audaxer

Thrugelmir wrote: »

A historical period with no prior precedence. QE reversal is uncharted water.

Maybe that's another reason to look for dividends as well as growth?

dunstonh

TBC15 wrote: »

What period of time do you regard as regular?

What constitutes significantly negative?

Regular is most typically taken monthly. I dont think frequency is overly important in the scheme of things.

Significantly negative is always a judgement call. if you hold 18 months in cash you can delay further moves to cash should markets fall. Most recoveries occur in under 18 months. So, you can reduce the worst of the impact. Its semi-timing of the markets but statistically, most crashes recover within that period.

Plus, with income units with income feeding the cash account, you can actually get closer to 24 months if needed.