What is "total return" investing?

MarcoM

Hello, would fixed rate cash investments be part of the strategy highlighted by the OP if interest rates are around 4 or 5%?
For example would a one year bond with a fixed interest rate of 4% be better than a 5% dividend paying IT?

Thanks

Linton

MarcoM said:

Hello, would fixed rate cash investments be part of the strategy highlighted by the OP if interest rates are around 4 or 5%?
For example would a one year bond with a fixed interest rate of 4% be better than a 5% dividend paying IT?

Thanks

Obviously and crudely 5% is better than 4%.

However there are a number of factors to consider:

 - You need to be careful since published savings rates are guaranteed whereas published % dividends are calculated as the past year's dividend in £s divided by the current price. If share prices have changed significantly the dividend % may be misleading.

 - It may depend on your tax position since savings and dividends are taxed separately.  

 - Normally you would buy an IT for the longer term, say at least 5 years.  If you buy, hold for a year and sell you may make sufficient loss to wipe out the dividends.

 - Broadly over the long term again you would expect that dividends in £ terms would at least increase with inflation. Fixed rate savings wre fixed.