Best place for stocks and shares ISA

Alexland

SteveSilva said:

So unless I'm missing something a 4% return from a UK trust is still far better than any savings account isn't it?

Yup provided the long term share price direction is flat or preferably increasing. If going for a dividend income strategy you want to avoid the traps where the income looks amazing but the capital is being eroded. The investment needs to be balanced to contain some growth prospects to keep up with inflation etc.

I think the point that eskbanker was making was that "shorter term expenses" are better serviced with cash savings because unless your expenses are covered by a large investment providing stable/smoothed dividend income then you don't want to be in a position where you are needing to sell down your investment at a market price that might be unfavourable at times.

Albermarle

SteveSilva said:

Alexland said:

SteveSilva said:

Thinking is that the savings will go towards investing in companies which will pay out dividends which will hopefully be higher than savings accounts.

It might take a while to get the £5k pot big enough to pay your council tax out of dividends. A well balanced global investment trust pays around 2% divis and a similar UK trust pays around 4% divis so it would require a global pot of £100k or a UK pot of £50k to pay around £2k pa in council tax from smoothed IT income.

So unless I'm missing something a 4% return from a UK trust is still far better than any savings account isn't it?

Yes you are missing something .
If you put £100 in a savings account earning 1 % and after one year you withdraw it then you will have £101.
If you buy £100 of shares producing a 4 % yield , than at the end you could have a range of results as the price of the shares could have gone up or down ( independent of the yield) 
For example this is the share price movement for a well known UK dividend paying ( 5%) investment.
https://www.hl.co.uk/shares/shares-search-results/c/city-of-london-investment-trust-ord-25p

Alexland

Albermarle said:

For example this is the share price movement for a well known UK dividend paying ( 5%) investment.
https://www.hl.co.uk/shares/shares-search-results/c/city-of-london-investment-trust-ord-25p

Yes I agree CTY is at risk of becoming a trap. I owned it briefly (at a profit, you have to kiss a few frogs) but the high income is pushing to manager to invest in deep value a style which isn't doing well at the moment and are frankly a mix of companies I partly wouldn't want to own. It amazes me that CTY is still trading at a premium to NAV when there are better invested trusts with slightly lower yields at a discount.