Thoughts on my Asset allocation and financial position

krish123

lescarp88 said:

AFAIK, Vanguard Lifestrategy funds do include a small allocation to REITs (I think some FTSE250 property stocks). Holding ishares global property in addition to VLS is overweighting property shares (which may not negatively correlate to equities) rather than access to direct property.

I went through a similar process of "what does VLS not include?". Ah, I'll add some of this or that, but then realised that lots of my intended IT purchases were already in the FTSE100/250 already and included in VLS.

IMO, one VLS fund could form your core (and could be a suitable investment for your whole pot). Then, think about whethet you truly need any diversifiers to a VLS fund as optional extras, e.g. gold, private equity, direct property, direct infrastructure, an all-weather/wealth preservation fund.

Regarding your ishares BRIC 50, perhaps consider a smaller % satellite allocation to these emerging markets.

Likewise, the City of London IT (CTY) mentioned above is concentrated to UK stocks, while not diversifying from what you already hold in VLS. CTY would be more suitable for a retiree in the decummulation phase, but you're looking to accumulate.

Yes thats its, im just trying to cover all bases and try to negatively correlate to VLS as you say. I think VLS80 does alot and therefore should probably hold more weighting in my portfolio, why complicate things right?

I could then hold the other 2 funds i mention but at 10/15% each.

krish123

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

Albermarle

I’m now 28 and will be investing for many years to come, full time employed and contribute to company pension (now at 16K)I

Presume the portfolio you detailed is outside the pension. If so there should be some coordination between investments strategy inside and outside the pension.

krish123

Albermarle said:

I’m now 28 and will be investing for many years to come, full time employed and contribute to company pension (now at 16K)I

Presume the portfolio you detailed is outside the pension. If so there should be some coordination between investments strategy inside and outside the pension.

correct, its in a S&S ISA with Charles Stanley direct. Pension is invested in Aviva my future Growth fund, quite similiar to VLS80 if i remember correctly.

Prism

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

krish123

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

one quick question, will the divi yield rise on VLS80? i think they have increased it in the past, am i correct?

Prism

krish123 said:

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

one quick question, will the divi yield rise on VLS80? i think they have increased it in the past, am i correct?

The yield is a % based on the last years dividend amount paid out over the price. As the price goes up, the yield goes down and vice versa. The dividend amount typically goes up a little each year but sometimes it goes down too, such as this year when company dividends are being cut.

AnotherJoe

krish123 said:

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

one quick question, will the divi yield rise on VLS80? i think they have increased it in the past, am i correct?

The dividend yield on a fund like this is accidental, not a strategy. It's just the natural yield of the indexes it follows. If anything it will fall, if you haven't noticed, companies are slashing dividends left right and centre. And with VLSs focus on oil and banks, that will be enhanced, so it will fall more than a general global fund that's more diverse. 

Re looking for funds with high income rather than taking natural yield and selling enough to make up what you need, look at the overall growthWhich gives more diversity  and higher income

https://www.investmentweek.co.uk/news/4014669/terry-smith-bad-news-equity-income-investors-surface

bowlhead99

krish123 said:

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

one quick question, will the divi yield rise on VLS80? i think they have increased it in the past, am i correct?

The dividend yield from VLS80 is simply a function of how much income (dividends and bond interest) is received by the fund from the company shares and corporate & government bonds it holds. The fund will pay out all its spare income (after the 0.22% running costs and tax etc) to its investors as dividend.

If interest rates are low and bonds expensive, what they receive from the bond portfolio will be low as a proportion of the value of the bond portfolio.  If the dividends it receives are low because many of the large companies in the index don't pay dividends (e.g. Amazon and Google) or because some companies that usually pay dividends have cut or suspended them (e.g. some banks and oil companies and covid-affected industries), the dividend income will be low as a proportion of the value of the equity portfolio.  So the combination of the bond and equity income as a proportion of the overall value of the fund at a point in time, may not be very high. 

The dividend yield of the fund (how much the fund pays out to investors as a proportion of its share price at the time they pay it out) would increase if they start to get more receipts from their investments without the fund value going up by the same percentage (e.g. if they start to get 20% more income and the fund has only gone up in value 10%, the yield from the fund will be higher than it was before). Likewise if the fund crashes in value because the bonds and equities it holds become less desirable based on market conditions, but income is still being received from them - because the companies don't cut their dividends and the bond issuers still keep paying their interest on time, then the ratio of income being received by the fund and passed on to its investors will be higher as a proportion of its share price.  Still, while it's nice to get lots of income as a proportion of your investment value, you would not really want the yield to be going up due to the shares crashing in value, because you will be worse off overall because your shares are not very valuable.

The bottom line is that the VLS fund does not just 'decide' to increase the dividend they pay. As a UK open ended investment company, HMRC makes them pay out all the spare income that they earn and haven't spent on running costs. The yield of what they pay to you is just a function of what their holdings are paying to them, as a ratio of their own share price (which they can't control either). So, I wouldn't go thinking to yourself, 'they increased the dividend in the past, maybe they'll do it again'. The dividend will just be what it will be.   If share prices are on the floor and interest rates and inflation really high, you are likely to see a higher dividend yield, but won't necessarily feel like you're getting a great return.

Audaxer

Prism said:

krish123 said:

A good comment earlier mentioned is that i can convert the VLS to income units later down the line however, the yield on this investment is rather low at 1.6% i believe.

If the yield isn't high enough for your requirements then sell some units to make up the difference. Don't let the yield dictate your income. Make you own plan and then work out how best to extract that.

I agree. As I said, if you want income from VLS80 best to just go for the accumulation version of the fund and sell 4% of the units or whatever percentage you want for a year's income. However if you only need an income top-up of around 1% to 1.5% you could have the income version of VLS80 and take the dividends as your income.

I think the other funds mentioned to give you what is not in the VLS80 is just a distraction that will add to your costs and not necessarily improve returns over the long term. If for example the BRIC ETF fell by 60% in a crash, would you be prepared to rebalance by selling some VLS80 that maybe had dropped only 30% in the crash. I think it is difficult decisions like this that make that strategy over-complicated, especially for an inexperienced investor.