ITs or Individual Co. Shares?

Audaxer

takesyourchances wrote: »

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

I've not needed to take income yet. The VLS40 and VLS60 are ahead so far on a Total Return basis, but if both portfolios fell in an equity crash and I needed income, I still feel it would be safer taking dividends from the income portfolio rather than selling VLS capital.

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.

You said in an earlier post you were nearing 40, so would that not mean you can't access your SIPP until 2036?

takesyourchances

Audaxer wrote: »

I've not needed to take income yet. The VLS40 and VLS60 are ahead so far on a Total Return basis, but if both portfolios fell in an equity crash and I needed income, I still feel it would be safer taking dividends from the income portfolio rather than selling VLS capital.

You said in an earlier post you were nearing 40, so would that not mean you can't access your SIPP until 2036?

I'd feel the same about taking dividends rather than selling vls capital during a downturn. I'd like to keep the vls going as long as possible if I can build the dividends high enough from ITs which hopefully will happen if I can maintain the investment levels I'm putting in.



Yes I'll be 40 end of this year, I didn't word that the best, I meant I think the age increase for drawing on an SIPP increases from 55 years old to 57 years old from 2028, so in my case it would be 2036 at my age for SIPP access. I've the vls 80 in my SIPP as it could be 20 plus years from I'd touch it and it's been in maybe 5 years from I transferred my stakeholder lump sum in and add monthly.


Good to exchange on this.

tin586

I hold a number of individual shares on the grounds that they are ‘hold forevers’ (eg Whitbread, Unilever, RB), but in the full knowledge that any company can implode.

I also hold a number of ITs for diversification and to be able to access geographies/sectors that would otherwise be difficult to access directly - eg SMT, MYI, BNKR.

But a constant nagging thought in my mind is whether I am paying fees for long term underperformance against a benchmark - the figures for BNKR and MYI are not so impressive and the latter’s charges are higher than I would like.

So why not just put the money into a global ETF or a number of different ETFs and save on charges?

Incidentally, I’ve never been interested in CTY because I see it as paying fees for a FTSE100 tracker, but I’ll gladly hear why I’ve got that totally wrong!

Apodemus

I’m not sure what your definition of fees includes, but I’ve got all my “hold forever”s in certificated form, so no ongoing platform charges.

All companies, of course, have internal costs for creating the dividend stream, they are just more obvious in an Investment Trust than they are for a Unilever.

Audaxer

tin586 wrote: »

Incidentally, I’ve never been interested in CTY because I see it as paying fees for a FTSE100 tracker, but I’ll gladly hear why I’ve got that totally wrong!

CTY currently has a yield over 4% and has increased dividend payments every year for over 50 years. So if someone is looking for that sort of level of regular income increasing with inflation, that seems to me a better option than a FTSE100 tracker.

bowlhead99

Audaxer wrote: »

tin586 wrote: »

Incidentally, I’ve never been interested in CTY because I see it as paying fees for a FTSE100 tracker, but I’ll gladly hear why I’ve got that totally wrong!

CTY currently has a yield over 4% and has increased dividend payments every year for over 50 years. So if someone is looking for that sort of level of regular income increasing with inflation, that seems to me a better option than a FTSE100 tracker.

Investment trusts (unlike FTSE100 trackers) don't have to distribute all their income, only a minimum portion, and can hold some back to pay dividends in leaner years. Some people might like that smoothing.

The other feature is investment concentration. The FTSE100 index has 48% of your money in just the top 10 companies (e.g. about 11% in Shell and 7% in HSBC), whereas - although CTY still tends to hold big FTSE 100 companies - it takes them in smaller proportions (11% in those two combined instead of 18%). It takes judgements over what it should hold and how much. And perhaps allocating a greater proportion to the things that aren't the largest leviathans may eke out greater returns, at the same time as avoiding 'eggs in one basket' problem of the FTSE's high company or sectoral concentrations.

Whether those features will provide you with enough comfort to prefer paying 0.4% OCF instead of more like 0.1% with a tracker to access CTY's investment allocation and dividend strategy, is in the eye of the beholder.

takesyourchances

Good to read the replies on CTY, in my IT portfolio I hold CTY as well, I have around £8500 at the moment in CTY so far and plan to bring it up to £10,000 in the next month or so as I balance out other IT holdings. I like the long rising dividend history and many of the points above.



I actually sold out of Woodford's fund a while ago, thankfully at around plus 8% at the time and the proceeds went across to CTY.



I may take out another UK IT at some point, no hurry at rhe moment as I want to balance out other IT's first and CTY can sit at 10k for a while as I add to others when I add the other £1500 and reinvest the income.

Audaxer

takesyourchances wrote: »

I actually sold out of Woodford's fund a while ago, thankfully at around plus 8% at the time and the proceeds went across to CTY.

That's turned out to be a great decision. Just wondering, if the WEIF had been set-up as an IT with the same type of remit as CTY, would the Mr Woodford have been able to change the strategy and buy all these unlisted stocks? In other words, could the same fate as WEI Fund happen to a mainstream equity income IT like CTY or other similar ones with a long history, or are ITs safer than funds in that respect?

cogito

Audaxer wrote: »

That's turned out to be a great decision. Just wondering, if the WEIF had been set-up as an IT with the same type of remit as CTY, would the Mr Woodford have been able to change the strategy and buy all these unlisted stocks? In other words, could the same fate as WEI Fund happen to a mainstream equity income IT like CTY or other similar ones with a long history, or are ITs safer than funds in that respect?

I keep a close watch on what my fund and IT managers are doing with my money which is why I too got out of Woodford when he strayed from his original path. It's not the most time consuming thing to do.

Reaper

Audaxer wrote: »

That's turned out to be a great decision. Just wondering, if the WEIF had been set-up as an IT with the same type of remit as CTY, would the Mr Woodford have been able to change the strategy and buy all these unlisted stocks? In other words, could the same fate as WEI Fund happen to a mainstream equity income IT like CTY or other similar ones with a long history, or are ITs safer than funds in that respect?

ITs are safer for stocks with poor liquidity (eg unlisted and property) because you should always be able to withdraw your money whenever you want.

In theory if it had been an IT Woodford could have completely filled it with unlisted stocks. You can buy funds like that if you want. (eg BMO Private Equity Trust and many others)

However it is up to the board of an IT to make sure the investments match the stated goal and if it was an Equity Income fund they would (or at least should) not have allowed that to happen.