Passive Income Strategies

DoctorStrange

I'm looking for people's thoughts on a realistic passive income yield,  and the options for achieving that.

In terms of numbers,  let's say around £250k and it can be locked away for 5 / 10 years. 

I was drawn towards BTL but that seems more hassle these days,  so I'm leaving thinking some sort of global income fund but not really sure if there are other options to consider as well?

Any sort of pointers would be appreciated really

Thanks

tacpot12

I would say that you should be able to get a yield of 4% after charges on a globally diversified passive portfolio, so £10,000pa on £250,000. I'm got 4.14% last year and expect to get about 3.8%, but my portfolio is mailing in actively managed Investment Trusts. I am expecting that dividends will recover within the next 12 months. I also expect that this yield would increase in line with the UK CPI.

I do hold c £30K in the iShares UK Dividend ETF. This is a passive fund and paid yields, after charges, of 6.1% in 2019, 7.7% in 2020 and 3.7% in 2021 (My portfolio tracks income from June to June, so the figure for 2021 will go up until the end of May 2021). 

Eco_Miser

You're in luck. Monevator is discussing Safe Withdrawal Rates on the front page at the moment. Don't forget to follow the links to earlier discussions.

Thrugelmir

DoctorStrange said:

In terms of numbers,  let's say around £250k and it can be locked away for 5 / 10 years. 

That would leave you exposed to the risk of capital loss. 

dunstonh

'm looking for people's thoughts on a realistic passive income yield,  and the options for achieving that.

That is very 1990s.  Any reason why you are restricting yourself to that method rather than alternatives?

so I'm leaving thinking some sort of global income fund but not really sure if there are other options to consider as well?

What is your experience with investing?  Are you ready to jump into that risk profile?  Most people looking at income are not.

and it can be locked away for 5 / 10 years. 

You dont lock money aware nowadays.   5 years is half an economic cycle.  Are you going to get the good half or the bad half?    Why they timescale?  Do you need to spend the capital between 5-10 years?

coyrls

I think "passive income" is a phrase used by BTL advocates, it is not commonly used in investing.

DoctorStrange

Some good points,  thanks, and my phrasing is poor (I've no firm plan so just thinking out loud)

What I think I'm after is a relatively stable value and a steady, largely predictable income. I know there's a lot of unknowns and that any investment can fall in value (which is why I'm happy to hold on for the medium to long term).

My emergency fund is robust but there's a danger I lose work in the next few months, hence looking for income to keep the bills at bay. I can use the emergency fund to pay the bills if its better to ignore the "income" bias and focus on "growth" instead?

UncleK

I like the look of the iShares UK Dividend ETF as I would be able to use the Domestic Authorities' income tax allowance (wouldn't I?). But is it FSCS protected as it's based in Ireland?

Linton

UncleK said:

I like the look of the iShares UK Dividend ETF as I would be able to use the Domestic Authorities' income tax allowance (wouldn't I?). But is it FSCS protected as it's based in Ireland?

IUKD is highly risky as it bases its allocations simply on companies paying the highest dividends. In 2007/8 those companies were the banks. IUKD crashed about 60% and only recovered relatively recently with dividends reinvested, which in this case they would not be. This is from memory, I cant find the actual date as yet again Trustnet charting is far too slow to be usable.

This is one reason to avoid seeking high dividends with a passive fund.  You really need a person to balance the allocations.  Though Vanguards FTSE UKEquity Income Index fund uses a bespoke highly artificial "Index" which Vanguard commisioned from FTSE which limits over-high allocations to specific companies or sectors.  Whether one regards this as passive investing or merely subcontracting the job of identifying the list of underlying assets to someone else is perhaps a matter of taste.