Income Portfolio's

Prism

AlanP wrote: »

So a Fund Manager who doesn't offer an Income focused option says they aren't needed - well there's a surprise.

He might be right, I have no idea, but I wouldn't base my decision on the views of one individual who has an alternative to "sell".

Agreed, I wouldn't either.

But he is right

Thrugelmir

AlanP wrote: »

So a Fund Manager who doesn't offer an Income focused option says they aren't needed - well there's a surprise.

He might be right, I have no idea, but I wouldn't base my decision on the views of one individual who has an alternative to "sell".

Berkshire Hathaway doesn't pay dividends. However does have a share buyback policy. Like many S&P 500 companies.

The strategy hasn't worked for FUNDSMITH EMERGING EQUITIES TRUST PLC though. Serially underperforming it's benchmark index since launch. Active investment managers aren't always right!

mickeypops

Sue58 wrote: »

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?

Sue, there's a lot on this thread about "total return" investing, but income investing as you propose is also a valid methodology. I have an income focussed portfolio of investment trusts and withdraw the yield to help fund my retirement. If you don't intend to sell down the assets, but just withdraw the dividends, then there are some obvious advantages, including not having to sell off investments in a market downturn.

The money observer magazine and website has some model portfolios that are worth looking at, both funds and trusts. Also, I can recommend the work of John Baron, who runs a tip sheet of investment trust portfolios covering income and growth investment stages. You can get seven day free trial of his work; you'll get plenty of ideas for IT based income strategies there.

Good luck

MP

green_man

Check out Johns thread on monthly income

https://forums.moneysavingexpert.com/showthread.php?t=4662291&highlight=income

Loads of great info in there and some ideas on where to start.

I have an income portfolio of approx £130k with the aim of providing £400/month income, which it does nicely.

Audaxer

green_man wrote: »

I have an income portfolio of approx £130k with the aim of providing £400/month income, which it does nicely.

That's about 3.7% yield, which is the same as my income portfolio after deducting platform charges. I've only had it a year and I'm hoping that the dividends increase each year roughly in line with inflation and continue to be paid throughout any equity crashes.

green_man, I'm interested in how long you have had your income portfolio and whether your £400 monthly income has been increasing each year?

green_man

Audaxer wrote: »

That's about 3.7% yield, which is the same as my income portfolio after deducting platform charges. I've only had it a year and I'm hoping that the dividends increase each year roughly in line with inflation and continue to be paid throughout any equity crashes.

green_man, I'm interested in how long you have had your income portfolio and whether your £400 monthly income has been increasing each year?

Hi. I’ve had my portfolio about 5 years but I’ve been building it up over that period so I can’t really say what the long term income trend is. It contains a number of funds like SCAM which have a steady income increasing year on year but also a number of more risky/speculative plays like PGIT, RDL. But the current income level is more like £500 per month so I’m prepared to accept a bit of volatility. I have 2 years until I’m 55 when I will start drawing this £400/month to supplement my pension fund drawdown.

username12345678

My question would be 'What happens to dividends during a bear market?'.

If dividend payouts have historically been maintained during market downturns (I don't know if this is the case) then providing the yield from your portfolio meets your income requirements then how is this not a less volatile method than using total return?

So for arguments sake a diversified pf of IT's which have a history of raising payouts that match inflation and meet your income needs would be a 'fire and forget' solution would it not?

Audaxer

green_man wrote: »

Hi. I’ve had my portfolio about 5 years but I’ve been building it up over that period so I can’t really say what the long term income trend is. It contains a number of funds like SCAM which have a steady income increasing year on year but also a number of more risky/speculative plays like PGIT, RDL. But the current income level is more like £500 per month so I’m prepared to accept a bit of volatility. I have 2 years until I’m 55 when I will start drawing this £400/month to supplement my pension fund drawdown.

Thanks, I wouldn't mind volatility if I could get a consistent growing income from natural yield, mainly from funds, but I'd also consider ITs. Some ITs do tend to provide that like City of London, SCAM and others. I'm just a bit unsure whether good equity income funds like Royal London UK Equity Income and Fidelity Global Dividend will be able to provide the same levels of dividends as the ITs, although the dividends are not able to be distributed as smoothly as ITs. It's hard to find a long history of dividends on funds to know whether they do provide the same level of dividends as ITs?

coyrls

username12345678 wrote: »

My question would be 'What happens to dividends during a bear market?'.

If dividend payouts have historically been maintained during market downturns (I don't know if this is the case) then providing the yield from your portfolio meets your income requirements then how is this not a less volatile method than using total return?

So for arguments sake a diversified pf of IT's which have a history of raising payouts that match inflation and meet your income needs would be a 'fire and forget' solution would it not?

Consistent yield wouldn’t provide a consistent income; if yield is consistent and your diversified pf of ITs drop in price by 50%, your income will drop by 50%.

Thrugelmir

username12345678 wrote: »

My question would be 'What happens to dividends during a bear market?'.

If dividend payouts have historically been maintained during market downturns (I don't know if this is the case) then providing the yield from your portfolio meets your income requirements then how is this not a less volatile method than using total return?

So for arguments sake a diversified pf of IT's which have a history of raising payouts that match inflation and meet your income needs would be a 'fire and forget' solution would it not?

An example.

HSBC has paid the same dividend for the past years. Currently yields over 6%.

The dividend has increased over the past 3 years due to the fact that it pays dividends in US$ although listed on the LSE.

The increase that shareholders has received is due to the depreciating pound. exchange rate. There's no element of inflation linking.

Falling exchange rates are masking the fact that many companies aren't actually significantly all increasing distributions. Hence the concern that investors are chasing yield. Without looking at the actual performance of the companies that they are investing in.

In the past 10 years or so the US$ exchange rate has fallen 51%. This masks a multitude of sins.