City of London Investment Trust

Rollinghome

MarcoM said:

Hi,

I have an investment with this trust which has generated around 5% in the past year or so.

I was wonderiong what folk on here thought of whether this IT would be suitable for a largish investment (i.e. 100k or so) for the purposed of generating a steady income
as part of an early retirement. More specifically, if one is interested in investing in an IT for income, would it be better to invest the lumps sum in one IT such as CTY London or should one look at a basket of investment trusts (assuming one is happy with a 5% ish return is the risk profile is reasonable).

It's not clear whether the £100k would be just a small part of a much larger pf, or the sole investment.

Clearly, if the latter, it would be unwise to invest all with a single manager, in a single region (GB) and with a single style (income).

If the former, then investment has to be considered in the round, including your tax position, and bearing in mind that for 22/23 £12,300 of  income taken as capital gains would be tax-free.

talexuser

gollum007 said:

Talexuser's post shows the danger of comparing apples with pears....

I specifically said that City's dividends were higher. My point was capital preservation long term (a normal retirement over 30 years is long enough let alone the OP talking about early retirement) and it will be very difficult to maintain 5% and increasing over the long term without affecting capital. Going for growth plus reasonable dividends and using CGT allowances to minimise tax makes more sense to me.

Thrugelmir

A more diversified basket of IT's and Investment Companies would be my personal option. 

A few examples to take a look at

UK -  HHI, MTU, BHI

International - HFEL, JSGI, BRSA

Other - ADIG, GABI, BRWM, TRIG, JLEN, BPCR

tebbins

Bravepants said:

tebbins said:

Bravepants said:

Incidentally, you don't necessarily HAVE to choose ITs with monthly income. You can have annual or quarterly dividends paid into a separate bank account and then set up a monthly standing order to your main current account. This is referred to as "income smoothing".

That just means you have money uninvested for no reason, and you would still have to manually update the standing order with dividend cuts/rises every so often. Surely easier to drop the monthly income requirement and just keep a sensible cash float that dividends flow into to keep topped up. I track my money on a "total view" balance sheet but I can see why people who like to keep money in separate "pots" would prefer your suggestion.

Surely your two arguments in bold are contradictory?  Your cash float would be uninvested.

When you say a "cash float" you are saying exactly what I am saying. It's not about keeping separate pots, it's about income smoothing...drawing a fixed sum each month from the cash float, which regularly gets topped up monthly, quarterly or even annually. If you are drawing an income you don't necessarily want the cash invested. 

Ah yep I think we've created an argument from nothing. Either way everyone should have an amount of cash you take from for income before directly selling capital or taking instead of reinvesting dividends and the effect of what we're both saying is just that.