Most reliable way to have an income from an ISA portfolio.

Thrugelmir

^opm^ said:

So it seems that total return is better then plonking it all in some high yielding income fund.
So is it best to leave it where it is and leave them as acc units and just say once a year sell 12k worth of units or a bit of both, keep it in same fund but take the income from the fund, quick look the vls 80 is yielding 1.87% So take the 1.87% yield and then top up to 12k by selling x amount of units.

VLS has returned negatively over the past 12 months (down 0.53%). No plan is without it's failings. The fad for growth is in part due to the high weighting of US stocks in portfolios more recently. US tax regime over the past decades has favoured capital over income in terms of treatment. 

bowlhead99

^opm^ said:

So it seems that total return is better then plonking it all in some high yielding income fund.
So is it best to leave it where it is and leave them as acc units and just say once a year sell 12k worth of units or a bit of both, keep it in same fund but take the income from the fund, quick look the vls 80 is yielding 1.87% So take the 1.87% yield and then top up to 12k by selling x amount of units.

It's unlikely that whatever investment you select, the natural amount of dividend income that it yields will be exactly the amount of money that you would like to take out and spend for the year.  The fund will either pay you more or less than you naturally want to receive, so if you are using the income version of the fund and receiving whatever they happen to pay you, you would need to sell some units and get more, or reinvest in some more units to give back the element you don't need. 

So, it can be simpler to do as you suggest and just hold Acc units and sell them whenever you want income - many platforms don't charge incremental fees for fund transactions, or if they do, they're low, and wouldn't cost you anything more if you received 1.9% naturally and had to sell 1.1% for yourself to make the 3.0 that you'd like to receive in cash, versus receiving 2.9% naturally and having to sell 0.1% for yourself, or receiving 3.1% naturally and having to reinvest 0.1% instead to get back to your target of 3% spending money (or whatever figure you like).

As the funds are in an ISA there's no tax to worry about, but people using taxpaying accounts might prefer to use Inc funds over Acc just so they can easily see when the cashflows are happening rather than having internal reinvestment to try to keep track of.  For you doing it all in an ISA, holding the funds as Acc is fine, although if you had a broad portfolio you might like to use Inc funds to keep delivering a bit of income to your cash account within the ISA so that you could either spend it or use it as part of rebalancing your holdings between the different funds you use.

Sailtheworld

I'd keep it simple and would leave the portfolio as is and sell investments as I needed / wanted the cash. After looking at selling costs I'd determine whether to do this annually, semi-annually or monthly.

Linton

^opm^ said:

1) So it seems that total return is better then plonking it all in some high yielding income fund.
2) So is it best to leave it where it is and leave them as acc units and just say once a year sell 12k worth of units or a bit of both, keep it in same fund but take the income from the fund, quick look the vls 80 is yielding 1.87% So take the 1.87% yield and then top up to 12k by selling x amount of units.

1) I would disagree somewhat. If you are seeking a steady income plonking all your money in a high yield income fund would be a bad idea.  But then so also would be plonking all your money in a volatile high return fund - eg Tech , Emerging Markets etc. 
What is important is to strike the right balance.

2) Your income strategy should be based on your requirements.  If you are happy to hold a large cash pot to cover several years annual expenditure you could forget a monthly income and simply take the cash from the pot as required, refreshing it every year from sales of units.   The downside is that the cash pot is returning virtually nothing.  Holding several years worth of cash is essential as you do not want to be selling units in the middle of a crash as you will be selling extra to achieve the same income and therefore may be reduucing the core investment needed for future returns.

On the other hand if you want a pretty steady monthly income you really need dividend/interest producing investments.  The advantage of doing things this way is that, assuming your platform supports it, you can automatically have every distribution paid directly into your current account with zero effort.  If you wanted a monthly income from selling units you would have to manually sell and transfer the money each month which would be a hassle and may, depending on your platform, incur extra costs.

And then you have the problem of whether you are using Pensions or S&S ISAs.  ISAs are straightforward as you can withdraw as much as you like whenever you like with no nasty complications.  Drawdown from pensions is more of a problem.  At least with the platforms I use, the platform processes pension drawdowns once a month through a payroll system in exactly the same way as wages.  The money needs to be available as cash in your account perhaps 2 weeks before the payroll run.  Additionally it is assumed that you are withdrawing the same amount every month.  If you wish to change the amount you will have to inform the platform, possibly in writing, and this could well incur a charge.  These hassles make simply taking the natural yield from pension investments impractical.

So, as with many either/or decisions in investing, I believe the right answer is both.  What I do is to have an S&S ISA based portfolio purely targetted on high dividends and interest which are paid out on receipt.  This is backed up with a growth portfolio held across both pensions and ISAs plus a cash pot.  The separate portfolios and cash pot are rebalanced once or twice a year, where necessary drawing down from the pensions to replenish the cash and income portfolio.

dunstonh

^opm^ said:

So it seems that total return is better then plonking it all in some high yielding income fund.
So is it best to leave it where it is and leave them as acc units and just say once a year sell 12k worth of units or a bit of both, keep it in same fund but take the income from the fund, quick look the vls 80 is yielding 1.87% So take the 1.87% yield and then top up to 12k by selling x amount of units.

Personally, I would use income units, even on total return.  A yield of around 1.8% helps top up the cash float and can delay the sale of units.  However, I wouldnt go out of your way to change units from Acc to Inc.   Maybe do it when you adjust your holdings through natural reviews.

Seldonista

Moe_The_Bartender said:

Income ITs:
REITs - but choose carefully. SGRO, BBOX, PHP are what I would choose.
Royalties - SONG
Contract - Infrastructure, Clean energy

I agree with posters above about investing for total return. It’s the only way that makes any sense to me and invest globally, not regionally.

What is SONG and what do you mean by contracts?

garmeg

Seldonista said:

Moe_The_Bartender said:

Income ITs:
REITs - but choose carefully. SGRO, BBOX, PHP are what I would choose.
Royalties - SONG
Contract - Infrastructure, Clean energy

I agree with posters above about investing for total return. It’s the only way that makes any sense to me and invest globally, not regionally.

What is SONG and what do you mean by contracts?

Presumably: Hipgnosis Songs Fund Limited Ord Npv, listed on the London Stock Exchange, trading with ticker code SONG.

bowlhead99

SONG is a stock market ticker (epic or tidm, basically the short code for finding it on the london stock exchange) for Hipgnosis Songs, a company that earns the rights to various music and gets an income from a stream of royalties.

By 'contracts' presuming he is just listing different types of investment vehicles that can produce different types of income - for example real estate holdings produce property rental income, intellectual property produces royalties, entities with contracts to run infrastructure or energy projects will get paid to do that (e.g. they may operate a toll road or a port or a trainline or rail link or hospital, school, prison assets, or power station or distribution grid).

Linton

Seldonista said:

Moe_The_Bartender said:

Income ITs:
REITs - but choose carefully. SGRO, BBOX, PHP are what I would choose.
Royalties - SONG
Contract - Infrastructure, Clean energy

I agree with posters above about investing for total return. It’s the only way that makes any sense to me and invest globally, not regionally.

What is SONG and what do you mean by contracts?

Contracts would be where a company gets a secure long term income from providing a service based on ownership of a capital asset - eg PFI, wind farms, toll roads

Seldonista

How does an ordinary investor access these?