Basic Question: Marcus vs. FTSE 100 Dividend

MaxiRobriguez

Thrugelmir said:

Improbable that the FTSE 100 is going to yield 4.5% over the next 12 months.  What's the source of your information? 

That was the FTSE100 yield pre-Coronavirus.

Since then share prices in the UK equity markets have tanked so the FTSE yield at the moment should be higher than 4.5%.

Of course, the likelihood is over the next few weeks and the months that the real yield is actually much smaller, because companies stop paying dividends in order to hold onto their cash.

And then there's the capital risk as companies start to go bust.

The answer to the OP of "what's the difference apart from I get a better return with the FTSE yield" is that one comes with capital at risk and the other doesn't. You may get better returns with FTSE investing, you may not. If you want to access the cash in the next 3-5 years then it'll probably be better suited in a Marcus. If you have a longer timeframe to leave the money to grow, then perhaps a FTSE100 investment would suit better. You may find with such a timeframe that a global equity tracker may suit even more though. 

colsten

If it was as simple as the OP suggests, Marcus wouldn't even exist, as everyone would just pick an FTSE 100 tracker (which, as an aside, is not a balanced investment and should therefore not be held on its own).

eskbanker

I'd like to compare my parents' siblings.

Let's assume my aunt had certain anatomical adjustments....

dunstonh

Obvious assumption is that you should be able to sell the tracker at the price you bought it for, and there are some small fees to maintain the tracker.

Actually, the fees are probably higher on the savings account.     The difference is that with investments you have explicit charging and with savings you have implicit charging.  You dont see the charges but they are there.  And the net interest margin is historically higher than most investment funds.   Although when rates go down, the margin tends to fall.

Zanderman

steampowered said:

For the reasons the Op describes it makes no sense to be keeping significant amounts of money in savings accounts, rather than sensible investments such as stock market trackers, unless there is a very good reason why they can't accept the risk of short term volatility (for example a need to use the money for a particular purpose within the next 3-5 years).

Equally one could say:
For people who need access to significant amounts of money in the next few years the OP's argument makes no sense, as stock market trackers may well lose value in that period and such short-term volatility (ably demonstrated by current events) may be massively counter-productive for them.

Which is of course, what you said, but you spun it to suit the narrative of those who don't need access. Many people do.need access.  Many people are also wary of investments.  There's nothing wrong with that.

No-one should be generalising that one way is definitely 'better' (even when adding an 'except for...' afterwards).

It's horses for courses, each to their own. Everyone's mileage differs.

steampowered

Zanderman said:

sMany people do.need access.  Many people are also wary of investments.  There's nothing wrong with that.

No-one should be generalising that one way is definitely 'better' (even when adding an 'except for...' afterwards).

It's horses for courses, each to their own. Everyone's mileage differs.

For people who do need access to their money in the short term, you are absolutely correct.

Being simply "wary of investments" is however not a good reason. Keeping money in cash savings account if saving for the long term is irrational behaviour, and is throwing money down the drain. 

Thrugelmir

MaxiRobriguez said:

Thrugelmir said:

Improbable that the FTSE 100 is going to yield 4.5% over the next 12 months.  What's the source of your information? 

Since then share prices in the UK equity markets have tanked so the FTSE yield at the moment should be higher than 4.5%.

Already around a third of the FTSE 100 has announced cancelled, suspended or cut dividends. If BP and Shell maintain their dividends then forecasts suggest the yield to be around 2.7% - 3.1% at current price levels. Though there's few big names who haven't declared their intentions yet. 

Audaxer

Thrugelmir said:

MaxiRobriguez said:

Thrugelmir said:

Improbable that the FTSE 100 is going to yield 4.5% over the next 12 months.  What's the source of your information? 

Since then share prices in the UK equity markets have tanked so the FTSE yield at the moment should be higher than 4.5%.

Already around a third of the FTSE 100 has announced cancelled, suspended or cut dividends. If BP and Shell maintain their dividends then forecasts suggest the yield to be around 2.7% - 3.1% at current price levels. Though there's few big names who haven't declared their intentions yet. 

I think this is where some long-established UK Equity Income Investment Trusts with decades-long records of increasing dividends are much better options than for example a FTSE100 tracker, as they have been able to keep increasing dividends in previous equity crashes. If these ITs are able to maintain their records in this crisis, the yields would be in excess of 5% if bought at the present time.

As regards the comparison with a FTSE100 tracker and a Marcus savings account, I agree with the other posters that 3-5 years is too short a time frame to ensure you do not lose capital value. However saying that, I would think there is a good chance that the FTSE100 and other markets will recover recent losses within that time frame. 
 

Thrugelmir

Audaxer said:

Thrugelmir said:

MaxiRobriguez said:

Thrugelmir said:

Improbable that the FTSE 100 is going to yield 4.5% over the next 12 months.  What's the source of your information? 

Since then share prices in the UK equity markets have tanked so the FTSE yield at the moment should be higher than 4.5%.

Already around a third of the FTSE 100 has announced cancelled, suspended or cut dividends. If BP and Shell maintain their dividends then forecasts suggest the yield to be around 2.7% - 3.1% at current price levels. Though there's few big names who haven't declared their intentions yet. 

I think this is where some long-established UK Equity Income Investment Trusts with decades-long records of increasing dividends are much better options than for example a FTSE100 tracker, as they have been able to keep increasing dividends in previous equity crashes. If these ITs are able to maintain their records in this crisis, the yields would be in excess of 5% if bought at the present time.


 

As has been discussed previously distribution of reserves reduces NAV. An open ended fund would have paid out this income previously. 
Impact on dividends is unlikely to be temporary either. With pension scheme deficits and holidays, Government funding likely to made priorities over restoration of dividends. In the USA companies seeking Government bail outs are prohibited from paying dividends or making share buybacks until 12 months after discharging the debt. 

Zanderman

steampowered said:

Zanderman said:

sMany people do.need access.  Many people are also wary of investments.  There's nothing wrong with that.

No-one should be generalising that one way is definitely 'better' (even when adding an 'except for...' afterwards).

It's horses for courses, each to their own. Everyone's mileage differs.

For people who do need access to their money in the short term, you are absolutely correct.

Being simply "wary of investments" is however not a good reason. Keeping money in cash savings account if saving for the long term is irrational behaviour, and is throwing money down the drain. 

In your view perhaps! That was my point.  Your view is your view.  It can't be applied to everyone.

Anyone considering investing does these days have to fill out a questionnaire on whether they understand and accept the risks of investing.  The risks highlighted include the need for longer term commitment and also the risk of losing capital. Some people don't want to risk capital so will not proceed when reminded (quite rightly) of this risk. That's not irrational that's just very cautious.