High Yield Defensive Stocks

Thrugelmir

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

As can be seen from CTY's portfolio now. Dividend heroes need not be high yield. Ability to grow the dividend is equally as important. 

Prism

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

Retirement is no different that accumulation. You don't need higher income producing funds or stocks than before. The only difference is that you sell rather than buy. 

Thrugelmir

Prism said:

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

Retirement is no different that accumulation. You don't need higher income producing funds or stocks than before. The only difference is that you sell rather than buy. 

The difference is the inability to replace lost capital. During the accumulation phase individuals have their own human capital to deploy.  When the Nikkei lost 50% as an example. Had someone had a high weighting in a SIPP to Japan that money would have been irrecoverably lost. As that particularly market has never recovered. Only takes one once in a lifetime event. 

Linton

Prism said:

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

Retirement is no different that accumulation. You don't need higher income producing funds or stocks than before. The only difference is that you sell rather than buy. 

In retirement you need income in the short term. Your need for long term growth is limited to inflation or perhaps a bit more - if you need significant real long term growth in your capital you are taking major risk.  It makes sense to me to invest significantly in companies whose objectives match yours.  However poor diversification is a serious risk so you do need to balance this against some growth.  This will also enable you to repenish your income funds if necessary.

Audaxer

Linton said:

Prism said:

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

Retirement is no different that accumulation. You don't need higher income producing funds or stocks than before. The only difference is that you sell rather than buy. 

In retirement you need income in the short term. Your need for long term growth is limited to inflation or perhaps a bit more - if you need significant real long term growth in your capital you are taking major risk.  It makes sense to me to invest significantly in companies whose objectives match yours.  However poor diversification is a serious risk so you do need to balance this against some growth.  This will also enable you to repenish your income funds if necessary.

I was thinking adding some growth funds to my income portfolio for more diversification, although I wasn't thinking of using them to top up the income funds. Along with dividends from the income funds, I was also planning to sell some capital from the growth funds on an annual basis to top up my income. Is there anything wrong with that strategy?

Prism

Linton said:

Prism said:

csgohan4 said:

I've read on the monevator that for high income, IT's are usually best suited, especially CTY which has low OCF and reasonable yields. As retirement wise your looking more for income rather than equity growth

Retirement is no different that accumulation. You don't need higher income producing funds or stocks than before. The only difference is that you sell rather than buy. 

In retirement you need income in the short term. Your need for long term growth is limited to inflation or perhaps a bit more - if you need significant real long term growth in your capital you are taking major risk.  It makes sense to me to invest significantly in companies whose objectives match yours.  However poor diversification is a serious risk so you do need to balance this against some growth.  This will also enable you to repenish your income funds if necessary.

Income is an option as it is during accumulation. I much prefer total return. I don't see any need to change approach during drawdown. When you need income you sell capital and also take whatever dividends you get. Dividends currently pay much less than a reasonable drawdown rate. I have not seen any reasonable retirement model recommending a bias toward natural yield.

I have nothing against dividends except that currently very few decent companies pay a high income. I have a small allocation to property and infrastructure but don't think of it any differently to growth. I just don't see why anyone would change approach just because of their age.

csgohan4

Would one strategy be on retirement or close to it, to sell a large chunk and put it in income generating funds via dividends, such as CTY? and the rest in wealth preservation funds containing glits like CGT

Linton

I split my investments into 3 completely separate portfolios. Growth 3/7, Income 2/7, Wealth Preservation 2/7.

The income portfolio is targeted at 6% return through dividends and interest and includes global equities, corporate bonds, em bonds, and infrastructure.  I doubt whether it will match inflation in the long term so the Growth portfolio is necessary to provide top ups through rebalancing and to provide cash lump sums for major one-off expenditure.

Prism

Linton said:

I split my investments into 3 completely separate portfolios. Growth 3/7, Income 2/7, Wealth Preservation 2/7.

The income portfolio is targeted at 6% return through dividends and interest and includes global equities, corporate bonds, em bonds, and infrastructure.  I doubt whether it will match inflation in the long term so the Growth portfolio is necessary to provide top ups through rebalancing and to provide cash lump sums for major one-off expenditure.

Hmm, maybe overall we have a similar strategy one difference being you are using yours and at the moment mine is just a plan. I just don't spilt into separate growth and income pots. Out of interest does your income pot on its own account for a good proportion of your living expenses or do you always have to sell a chunk of the growth or wealth preservation pot to top it up?

Linton

Prism said:

Linton said:

I split my investments into 3 completely separate portfolios. Growth 3/7, Income 2/7, Wealth Preservation 2/7.

The income portfolio is targeted at 6% return through dividends and interest and includes global equities, corporate bonds, em bonds, and infrastructure.  I doubt whether it will match inflation in the long term so the Growth portfolio is necessary to provide top ups through rebalancing and to provide cash lump sums for major one-off expenditure.

Hmm, maybe overall we have a similar strategy one difference being you are using yours and at the moment mine is just a plan. I just don't spilt into separate growth and income pots. Out of interest does your income pot on its own account for a good proportion of your living expenses or do you always have to sell a chunk of the growth or wealth preservation pot to top it up?

The income portfolio currently provides about 20-25% of ongoing expenditure, the rest being covered by SP, annuities and Mrs L’s small dB pension. Major expenses are taken from cash and PBs within the WP portfolio which are subsequently replenished by rebalancing. I have never sold an investment specifically to meet a short term expense.