Investment - Accumulation vs Income

bostonerimus

jamesd said:

Sea_Shell said:

In a downturn would the INC units still be providing the level of income you may need?   You may still need to sell capital units.

ColdIron said:

That's what a decent sized cash buffer is for. While the capital value can drop alarmingly, dividends usually fare much better. 

I don't expect income units to ever deliver enough income because that would compromise total return way too much. But as ColdIron suggested they do extend the time that cash and bonds can last until it becomes necessary to sell equities.

As an example of a single type of "mutual fund unit" you can look at US funds. All funds will distribute cash from dividends, capital gains or interest on a regular schedule and all the holders will see the value of the units drop. Those that have chosen the reinvest option buy more shares at the lower price, and those that want the income have the distributions deposited in a cash account. The US tax man requires funds to annually pass on some of their capital gains. If this is done inside a tax wrapper then there's no tax on the dividend, capital gains or interest, but income tax will be assessed on any monies withdrawn. So in a Total Return approach in the US you automatically get some capital gains as well as dividends without ever having to actually sell any units.

jamesd

JohnWinder said:

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https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000MC3M

Do you see any potential issue with the relatively high Japan exposure?

With a strong exposure to consumer defensive, this looks interesting. Would there be an Acc version of this, do you know? Or if not, are you aware of a similar fund by a different provider as an Acc?
Thanks

Well, that's one of the problems.

That quote is from the "Funds for a stockmarket downturn/crash" thread, not this one. That B fund has a possible problem: it's the 0.65% OCF version when there's a clean D version with 0.5% OCF available, though maybe not on the specific platform.

cloud_dog

Tommohawk said:

I’m looking at Vanguard because they are low cost, informative, and seem user friendly. Probably Lifestrategy 40% equity or other lowish risk fund.

I’d be grateful for any input from the knowledgeable folk at MSE - sorry for the long post!

@Tommohawk, the platform aspect has only lightly been touched on in this thread but, you may want to look at fixed or capped price providers instead of Vanguard.  £140k at Vanguard is £210pa, increasing with growth.

If you were to go with iWeb, as an example, there is no ongoing platform fee (so £0pa), they do however charge £5 per transaction.  Unfortunately, they also have a £100 account opening fee.  Even with these charges you would still be better off than with Vanguard and from year 2 onwards you would be significantly better off.  Something to ponder.

Tommohawk

cloud_dog said:

Tommohawk said:

I’m looking at Vanguard because they are low cost, informative, and seem user friendly. Probably Lifestrategy 40% equity or other lowish risk fund.

I’d be grateful for any input from the knowledgeable folk at MSE - sorry for the long post!

@Tommohawk, the platform aspect has only lightly been touched on in this thread but, you may want to look at fixed or capped price providers instead of Vanguard.  £140k at Vanguard is £210pa, increasing with growth.

If you were to go with iWeb, as an example, there is no ongoing platform fee (so £0pa), they do however charge £5 per transaction.  Unfortunately, they also have a £100 account opening fee.  Even with these charges you would still be better off than with Vanguard and from year 2 onwards you would be significantly better off.  Something to ponder.

Hi and thanks for that very practical advice. I did look at a number of alternatives listed in a few different guides but TBH I need something uber user friendly and not necessarily tons of choices!. I didn't look at iWeb though so I'll have a look now. I'm retired as of now, but I still think of my time in £/hour and if it takes me all day to get my head round something thats a lot of £s!
I'm also a bit concerned that Vanguards LifeStrategy funds seem to US centric - but that's another issue and I'll post a separate query on that. Turned into a lively thread, some of which I can follow!

Tommohawk

Also looks like iWeb outsource their drawdown service to AJ Bell which may complicate things from and admin perspective. I did look at AJ Bell as an alternative... and cant remember why I came back to Vanguard. I have been going in round in circles for a while with this and need to make some decisions soon!