ITs or Individual Co. Shares?

george4064

EdGasketTheSecond wrote: »

Sounds a good plan; pay someone to do what you already had for free!

I don't think that's a fair assessment of what Capital0ne is doing here.

He is effectively switching out a few individual shares that are in the respective IT top 10 holdings, for a fully managed diversified (relatively speaking) investment trust. The various advantages of holding the IT vs holding a number of the underlying holdings individually have already been stated in previous posts.

Another advantage to holding the IT vs a number of the underlying individual shares is that the IT is able to hold back cash reserves. Which the IT will be able to fall back on when underlying dividends fall (or stop) and they are able to maintain their dividend. Albeit individual companies are able to do this to some extent too, you'll get a much better 'dividend reserve fund' with an IT than an underlying share in the IT portfolio.

Linton

I have switched most of the 18 individual holdings that comprised close to 50% of my income portfolio to funds as I just did not have the time or concentration to keep on top of what was happening to the companies, let alone undertake the research needed to identify new candidates. 18 holdings is aclose to the minmum one needs to have reasonable diversity and to be able to accept the occasional failure.


Overall I am expecting the funds to perform as well as the individual shares. Possibly a slight decrease in yield coupled with a decrease in losses due to company failure.


One point I would make is that if one is after income dont focus purely on UK equity income. There are good dividends to be found in Europe and SE Asia. Some of the infrastructure funds look good to extract income from the USA where dividends are not easy to find. And then there are corporate and other higher risk bonds.

Audaxer

Linton wrote: »

One point I would make is that if one is after income dont focus purely on UK equity income. There are good dividends to be found in Europe and SE Asia. Some of the infrastructure funds look good to extract income from the USA where dividends are not easy to find. And then there are corporate and other higher risk bonds.

It is also worth considering Global Equity Income funds in an Income portfolio. Although the yields are generally a bit lower than the UK at around the 3% mark, the two Global Equity Income funds I hold have produced a much higher Total Return than my UK Equity Income funds over the past couple of years.

atush

dividendhero wrote: »

I prefer IT's over individual companies, for the reasons put so eloquently by bowlhead99.

On top of the reason he/she stated, there are many great companies outside the UK. Holding these directly is a pain, really easy if held via MYI or HINT etc

I agree, and Finsbury is on my buy list

takesyourchances

Interesting read, I have a growing number of IT's which are starting to create a snowball effect of dividends after a few years and I am re-investing all the income and adding new capital. Outside of trackers / VLS, I am invested mostly in IT's now in my ISA and building towards an income stream along with compounding.

I am heading to 40 years old this year, hopefully keeping to the plan will give me options at some point later in this new approaching decade and beyond.

Audaxer

takesyourchances wrote: »

I am heading to 40 years old this year, hopefully keeping to the plan will give me options at some point later in this new approaching decade and beyond.

Sounds a good plan. Interested to know what you mean by it giving you options in the coming decades?

takesyourchances

Audaxer wrote: »

Sounds a good plan. Interested to know what you mean by it giving you options in the coming decades?

Thanks, I am trying my best with it and sticking to the strategy. It's actually quite amazing when the progress is noticeable year on year with the income side whlch adds to the compound.


I mean with giving me options in the coming decades with working towards the option of hopefully working less than full time, drawing an income and covering living expenses and more in time. Also I've overseas property owned outright I'd like to spend more time at in the future and building up an income stream outside of trading work time for money. I know it'll take discipline and dedication but hopefully keeping to the plan will help it be achievable.



These sorts of options, I feel it helps to have a vision and goal when you are investing a lot regular over a long period of time.


Hope that helps explain and always good to hear others motivations and goals

Audaxer

takesyourchances wrote: »

Thanks, I am trying my best with it and sticking to the strategy. It's actually quite amazing when the progress is noticeable year on year with the income side whlch adds to the compound.


I mean with giving me options in the coming decades with working towards the option of hopefully working less than full time, drawing an income and covering living expenses and more in time. Also I've overseas property owned outright I'd like to spend more time at in the future and building up an income stream outside of trading work time for money. I know it'll take discipline and dedication but hopefully keeping to the plan will help it be achievable.



These sorts of options, I feel it helps to have a vision and goal when you are investing a lot regular over a long period of time.


Hope that helps explain and always good to hear others motivations and goals

Thanks, yes many people advocate you should look for Total Return, but I think there is a lot to be said for income and growth funds and ITs that produce regular growing dividends.

I am retired and have an active income portfolio, as well as VLS funds in another portfolio. It will be interesting to see over time which produces the best returns, but in a major downturn whenever it comes, I think I will feel more comfortable having dividends still coming in than having to sell capital in the event of a prolonged bear market.

capital0ne

EdGasketTheSecond wrote: »

Sounds a good plan; pay someone to do what you already had for free!

Cheers mate! Now the shares I mentioned are no brainers really, the usual biggest companies in the FTSE100 so I guess I could just buy more of those and forget ITs. But if that werer so everyone would do just that.

But all you need is a Deepwater Horizon event to knacker my BP shares, or I could have put my dosh into Woolworths - what could possibly have gone wrong with that.

Next I could just emulate the top 10 shares of say CTY, but why have 10 sharedealing costs to set it up when one would do. And when it comes to divi reinvestment thats another 20+ dealing charges, albeit probably at a discounr, but CTY would only have four divi reinvestments.

Those are some of my reasons for moving into an IT oriented portfolio.

takesyourchances

Audaxer wrote: »

Thanks, yes many people advocate you should look for Total Return, but I think there is a lot to be said for income and growth funds and ITs that produce regular growing dividends.

I am retired and have an active income portfolio, as well as VLS funds in another portfolio. It will be interesting to see over time which produces the best returns, but in a major downturn whenever it comes, I think I will feel more comfortable having dividends still coming in than having to sell capital in the event of a prolonged bear market.

Yes I agree, I think too there is a lot to be said for income and growth funds and ITs that produce regular growing dividends. It is a solid foundation as a strategy I feel and until times the income is needed to be used, re-investing the income over and over helps really build it and dividends as you said should come in, in "some form" (maybe some will cut back) during a downturn.



My IT's so far cover Global, UK, Europe, Asia, States, Property REIT's and Infrastructure. My eye is on adding a Biotech IT maybe next as the portfolio increases and a few other areas eventually.



It looks possible in the next few years, fingers crossed for the dividend income to cover my basic living expenses which would be a good mental target to reach and keep on going type idea until I would want / need to draw on the dividend income.



It is interesting that you are retired and this approach is working for you along with holding VLS funds.



My IT's are in my S&S ISA, so all is tax free and gives the option of use before I would reach the age to draw on my SIPP, which in my case will be 57 years old (from 2028) so my S&S ISA would be my option if I wanted to work less before then or even retire fully before 57.



I have a VLS 60 in my S&S ISA too, so that would be selling units eventually for income. If the dividend income was enough from the IT's I can let the VLS sit longer.



My SIPP which would be 57 years or after is a sole VLS 80 at the moment which was started with a lump sum several years ago from an old Stakeholder pension I was paying into from my early 20's, so this has years ahead until there is the option to draw from it and could sit longer.


This is my general strategy and wanting to give options before pension age also.