Passive / Active investments for income.

Alexland

Prism said:
If a fund that I liked paid a 10% or 0% dividend it wouldn't bother me which.

It depends on your strategy for drawing income during sustained market lows and if you hold more cash and bonds then you get your performance hit in a different way.

Linton said:

I do not believe that taking a steady £10K annually, inflation linked, from a £200K portfolio is safely sustainable in the long term.

I guess that's what the OP has noticed when doing their initial research into trusts like the popular CTY which pays nearly 5% but the share price is still around 10% below its pre covid crash level because it was holding too many poor quality wasting assets.

Prism

Linton said:

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.

I wouldn't say that value investing is related to equity income. For example Fidelity special values (or situations) is a value based equity fund that pays a 2% dividend. It also comes as an accumulation fund that pays no dividend. Europeans Assets Trust is a growth fund that pays a 6% dividend. You can select a desired value/blend/growth allocation without overly worrying about the dividend it pays. 

Selling funds for income is trivial, and allows for more control should that be desired. With an income fund you might have to wait 6 weeks or more for the dividend payment after the price drop. If you sell units you can have them the next day, or immediately if its a trust.

Thrugelmir

Alexland said:

Prism said:
If a fund that I liked paid a 10% or 0% dividend it wouldn't bother me which.

It depends on your strategy for drawing income during sustained market lows and if you hold more cash and bonds then you get your performance hit in a different way.

Linton said:

I do not believe that taking a steady £10K annually, inflation linked, from a £200K portfolio is safely sustainable in the long term.

I guess that's what the OP has noticed when doing their initial research into trusts like the popular CTY which pays nearly 5% but the share price is still around 10% below its pre covid crash level because it was holding too many poor quality wasting assets.

Which companies are you referring to? 

Thrugelmir

Prism said:

Linton said:

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.

 Europeans Assets Trust is a growth fund that pays a 6% dividend. 

EAT returns capital. European shares are generally low dividend payers. A consequence of the high tax treatment of dividends in many countries. 

Alexland

Thrugelmir said:

Which companies are you referring to? 

Well the top holding for most of the past year was British American Tobacco. 

Prism

Thrugelmir said:

Prism said:

Linton said:

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.

 Europeans Assets Trust is a growth fund that pays a 6% dividend. 

EAT returns capital. European shares are generally low dividend payers. A consequence of the high tax treatment of dividends in many countries. 

I know, that was my point. It is entirely possible to have a growth oriented trust that sells shares to pay a high dividend and a value oriented trust that keeps some of its dividends and reinvests them as growth, paying less out along the way.

Thrugelmir

Alexland said:

Thrugelmir said:

Which companies are you referring to? 

Well the top holding for most of the past year was British American Tobacco. 

Churns out cash.  At least that's tangible.

Better than buying Tesla at 320 times annual revenues. Which appears to be the new definition of growth it seems. 

For the record I hold neither. 

Thrugelmir

Prism said:

Thrugelmir said:

Prism said:

Linton said:

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.

 Europeans Assets Trust is a growth fund that pays a 6% dividend. 

EAT returns capital. European shares are generally low dividend payers. A consequence of the high tax treatment of dividends in many countries. 

I know, that was my point. It is entirely possible to have a growth oriented trust that sells shares to pay a high dividend and a value oriented trust that keeps some of its dividends and reinvests them as growth, paying less out along the way.

 Wish more IT's would follow the same principle. 

Prism

Thrugelmir said:

Prism said:

Thrugelmir said:

Prism said:

Linton said:

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.

 Europeans Assets Trust is a growth fund that pays a 6% dividend. 

EAT returns capital. European shares are generally low dividend payers. A consequence of the high tax treatment of dividends in many countries. 

I know, that was my point. It is entirely possible to have a growth oriented trust that sells shares to pay a high dividend and a value oriented trust that keeps some of its dividends and reinvests them as growth, paying less out along the way.

 Wish more IT's would follow the same principle. 

The EAT way? Most of my investments are in a tax wrapper so it makes no difference to me if I get a dividend or manufacture my own by selling some shares. 

AsifM068

Dividends come mainly from value stocks, is this correct?