Vanguard accumulation to income

MarcoM

Hello,

With a split investment 60 40 and 80 20 which is currently valued at 150k and currently on an accumulation basis is there a product within vanguard which could provide approx 4 to 6% income a year rather than on an accumulation basis, with a similar risk profile to the current pot. I am happy with vanguard and the mostly low cost fees so happy not to change platform so long as the above percentages are achievable.
Any suggestion is appreciated 
Thanks

masonic

Have you considered selling 4-6% of your current holding per year to meet your income needs? I don't believe there is any cost associated with doing so at Vanguard.

GeoffTF

I assume that you are using VLS 60 and VLS 80. You could use VLS 100 and Vanguard Global Bond Index Fund (VEVE and VAGP would be cheaper), and sell some of whichever is above your target allocation (e.g. 70% equities and 30% bonds) to meet your income needs.

Adyinvestment

I would do something like the below, its not going to be exactly the same but will give you around 4% income and (at least to my relatively inexperienced mind) a similarish risk profile.


70% VHYL
30% Short-Term Money Market Fund (only going to work when interest rates are elevated)

To get the UK bias Vanguard have, take some off VHYL and replace with VUKE or/and VMID


No bonds involved in the above (replaced with the money market) which may prove to be a negative in the long run, and you will need to keep an eye on interest rates.

GeoffTF

Adyinvestment said:

I would do something like the below, its not going to be exactly the same but will give you around 4% income and (at least to my relatively inexperienced mind) a similarish risk profile.


70% VHYL
30% Short-Term Money Market Fund (only going to work when interest rates are elevated)

To get the UK bias Vanguard have, take some off VHYL and replace with VUKE or/and VMID


No bonds involved in the above (replaced with the money market) which may prove to be a negative in the long run, and you will need to keep an eye on interest rates.

VHYL increases the risk profile because it includes only higher yielding stocks, which reduces diversification. It will exclude whole markets and whole sectors. As has been said, sales cost nothing on Vanguard's platform. The OP's present portfolio of VLS 60 and VLS 80 is messy because it does bot maintain a fixed bond percentage, which is the main point of VLS. There is little point in adding VMID, which is "small cap" in world terms. Vanguard UK does not provide a FTSE Global Small cap fund, just an MSCI small cap fund, which will duplicate stocks if it is paired with a FTSE Global Large and Medium cap fund.

Qyburn

The VLS funds all have Income versions. How much of his 4% would they be likely to return?

masonic

Qyburn said:

The VLS funds all have Income versions. How much of his 4% would they be likely to return?

Unlikely to be more than half. Given the seismic shift in monetary and interest rate policy recently, which will impact both bond interest and company dividend policy, it's a difficult figure to predict. However, the significant US allocation, where dividends are disfavoured due to local tax policy, will tend to keep the figure relatively low.

It is not clear whether the OP holds Inc or Acc units, or whether holdings are wrapped or unwrapped. However, it probably isn't worth changing from Acc to Inc just to obtain a portion of the desired income to be taken from this pot.

GeoffTF

Qyburn said:

The VLS funds all have Income versions. How much of his 4% would they be likely to return?

Not much. VLS 60 has a yield of 1.75%:

https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-60-equity-fund-income-shares/distributions

They are automatically reinvested with the accumulation units.

EthicsGradient

Just checking - these are in an ISA currently, are they? If not, you'll need to think if capital gains tax is involved with any switch.

MarcoM

EthicsGradient said:

Just checking - these are in an ISA currently, are they? If not, you'll need to think if capital gains tax is involved with any switch.

hi yes everything is in an isa

MarcoM

masonic said:

Qyburn said:

The VLS funds all have Income versions. How much of his 4% would they be likely to return?

Unlikely to be more than half. Given the seismic shift in monetary and interest rate policy recently, which will impact both bond interest and company dividend policy, it's a difficult figure to predict. However, the significant US allocation, where dividends are disfavoured due to local tax policy, will tend to keep the figure relatively low.

It is not clear whether the OP holds Inc or Acc units, or whether holdings are wrapped or unwrapped. However, it probably isn't worth changing from Acc to Inc just to obtain a portion of the desired income to be taken from this pot.

currently all in an ISA on  an accumulation basis.
do you think there is no way of achieving a 4% return at all within Vanguard with the funds?