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Passive / Active investments for income.

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Afternoon forum,

Any thoughts on Vanguards FTSE UK Equity Income Index Fund within an ISA as a long term hold (10 years plus) for a passive source of income when I retire at 60 about 7 years away, and are there any suitable alternative passive funds for income that I should consider?

I'm currently reading about Investment Trusts for income as well yet it appears to me that high yield Trusts, say 4% plus, tend to sacrifice growth to an extent - any pointers would be very much appreciated. 

Many thanks 


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  • ColdIron
    ColdIron Posts: 9,836 Forumite
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    edited 12 November 2021 at 7:12PM
    AsifM068 said:
    Afternoon forum,

    Any thoughts on Vanguards FTSE UK Equity Income Index Fund within an ISA as a long term hold (10 years plus) for a passive source of income when I retire at 60 about 7 years away, and are there any suitable alternative passive funds for income that I should consider?
    I wouldn't put all my eggs in one UK basket, you might look at something like Vanguard's FTSE All World High Dividend Yield UCITS ETF (VHYL) for diversification in a single package
    If you don't need the income for 7 years why not wait and prioritise growth for now and start with a bigger pot?
    I'm currently reading about Investment Trusts for income as well yet it appears to me that high yield Trusts, say 4% plus, tend to sacrifice growth to an extent - any pointers would be very much appreciated.
    ITs can be good for income but you can't have your cake and eat it.
  • dunstonh
    dunstonh Posts: 119,688 Forumite
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    Any thoughts on Vanguards FTSE UK Equity Income Index Fund within an ISA as a long term hold (10 years plus) for a passive source of income when I retire at 60 about 7 years away, and are there any suitable alternative passive funds for income that I should consider?
    A UK equity income fund would fill your UK allocation but it would leave you missing about 8 or 9 funds for all the other areas.

    it is also quite an interesting active decision as you would be using an investment style that is typically only good for around half the economic cycle.

    I'm currently reading about Investment Trusts for income as well yet it appears to me that high yield Trusts, say 4% plus, tend to sacrifice growth to an extent - any pointers would be very much appreciated. 
    That is pretty much the case with all high yield strategies.

    This is why the more popular method nowadays is total return.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Prism
    Prism Posts: 3,847 Forumite
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    Alexland said:
    I wouldn't touch a passive income fund with a barge pole as you risk just sucking up a load of poor quality high yield companies.
    There are investment trusts that get a good balance of yield and capital growth while still investing in good quality companies if you are willing to spend the time on selecting and monitoring them. The costs are a bit higher but that is generally covered by the enhanced return they achieve by using a conservative amount of gearing.
    I'll take that one step further and say that I wouldn't touch any equity income fund with a barge pole. I'll take the standard dividends from a fund but no more. I can get income from other places like savings, bonds and property.
  • Alexland
    Alexland Posts: 10,183 Forumite
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    Prism said:
    I'll take the standard dividends from a fund but no more.
    Each to their own but I don't see the harm, if all you are looking for is the capital and dividends to keep up with inflation, in slightly slanting the portfolio to deliver a little bit more income at the expense of some of the real capital growth provided you don't go so far as to compromise the quality of the underlying investments. It's not always about maximising returns and if the investment serves a purpose that's a good result.
  • AsifM068
    AsifM068 Posts: 193 Forumite
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    As an aside and slightly off tangent are pension annuities really that bad in terms of value? At 60, my DB pension will kick in but will need another 10K p/a to supplement my pension. I should have around 200K to invest within my ISA to invest at 60 purely as a source of income. Any thoughts?
  • dunstonh
    dunstonh Posts: 119,688 Forumite
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    As an aside and slightly off tangent are pension annuities really that bad in terms of value? 

    At the moment, yes.   Although they will come back into play in the future.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Linton
    Linton Posts: 18,159 Forumite
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    Prism said:
    Alexland said:
    I wouldn't touch a passive income fund with a barge pole as you risk just sucking up a load of poor quality high yield companies.
    There are investment trusts that get a good balance of yield and capital growth while still investing in good quality companies if you are willing to spend the time on selecting and monitoring them. The costs are a bit higher but that is generally covered by the enhanced return they achieve by using a conservative amount of gearing.
    I'll take that one step further and say that I wouldn't touch any equity income fund with a barge pole. I'll take the standard dividends from a fund but no more. I can get income from other places like savings, bonds and property.
    Equity income funds are in my view helpful in retirement unless you want to adopt an unbalanced 100% Growth investment strategy - something I would not dare do. Their advantage is that they are an efficient use of assets as they meet 2 objectives from a single investment.  Equity income funds add "Value" to balance the "Growth" investments and produce an income which can be transfered automatically to one's current account with zero effort.  It would seem far more logical and more easily implemented to do that than the reverse of taking income from selling Growth whilst reinvesting the dividends from Value.

  • Prism
    Prism Posts: 3,847 Forumite
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    Alexland said:
    Prism said:
    I'll take the standard dividends from a fund but no more.
    Each to their own but I don't see the harm, if all you are looking for is the capital and dividends to keep up with inflation, in slightly slanting the portfolio to deliver a little bit more income at the expense of some of the real capital growth provided you don't go so far as to compromise the quality of the underlying investments. It's not always about maximising returns and if the investment serves a purpose that's a good result.
    I agree its not always about maximising returns and I am all for investing with purpose. I don't think whether or not I get a dividend to be part of that decision though. If a fund that I liked paid a 10% or 0% dividend it wouldn't bother me which.
  • Linton
    Linton Posts: 18,159 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    AsifM068 said:
    As an aside and slightly off tangent are pension annuities really that bad in terms of value? At 60, my DB pension will kick in but will need another 10K p/a to supplement my pension. I should have around 200K to invest within my ISA to invest at 60 purely as a source of income. Any thoughts?
    I do not believe that taking a steady £10K annually, inflation linked, from a £200K portfolio is safely sustainable in the long term. Which of those characteristics would you be prepared to sacrifice?
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