Global Bond Index Fund

MarcoM

eskbanker said:

MarcoM said:
If one has a capital gain loss carried over from previous years I guess it make sense to generate income from selling something and then not pay tax on this compared to getting a dividend from another fund and then having to pay dividend tax?

Capital losses can't be offset against income tax, if that's what you're suggesting?

no, i am saying that if i sell some accumulation units and make a gain to fund income, i can offset the tax due on the capital gain against previous lossess, i.e. I had cineworld shares and it went bust so have lost that money, I can offset this against my capital gain

thunderroad88

JohnWinder said:

'Have you considered a monthly income fund to pay those bills? A couple of good ones which have also had good capital growth over 5 years are Aegon Diversified Monthly Income'

This illustrates some of the points I offered with Funds A and B.

The Aegon fund as an alternative to VLS 40 (since Aegon is in the 20-60% equities range) seems a poor choice unless you want the higher income without selling. Firstly, it costs 0.37%/year more in management fee; over 25 years this hands 10% of your profits to the fund manager that you would otherwise have kept. Secondly, it's an actively managed fund, about which Morningstar's active/passive barometer and SPIVA's reports suggest will mean that it will underperform something comparable with near certainty over a couple of decades. The EU securities regulator's report from 2019 says the same thing: ' costs are higher for actively managed equity funds compared to passively managed equity funds, which leads to lower performance net of costs for active compared to passive funds;'

https://www.esma.europa.eu/sites/default/files/library/esma50-165-731-asr-performance_and_costs_of_retail_investments_products_in_the_eu.pdf

Thirdly, do active balanced funds like Aegon's do well? Under 5% might: https://www.pipsbenchmark.com/2023/05/does-award-winning-fund-beat-benchmark.html

I’m not sure I get your argument. If the OP has £100k ideally in an ISA and wants £500 a month income to cover a regular expenditure, he’d be better using the Aegon fund which will deliver this income. VLS40 won’t do this with its low yield so he’ll have to sell units to achieve his income requirement. Its record suggests that after 5 years he’ll have marginally more capital growth if he’d chosen the Aegon fund too. Sure he’ll pay £370 more a year to hold the Aegon fund but he’ll more than make up for that with more income and capital growth. Or am I fundamentally missing something here?

GeoffTF

thunderroad88 said:

I’m not sure I get your argument. If the OP has £100k ideally in an ISA and wants £500 a month income to cover a regular expenditure, he’d be better using the Aegon fund which will deliver this income. VLS40 won’t do this with its low yield so he’ll have to sell units to achieve his income requirement. Its record suggests that after 5 years he’ll have marginally more capital growth if he’d chosen the Aegon fund too. Sure he’ll pay £370 more a year to hold the Aegon fund but he’ll more than make up for that with more income and capital growth. Or am I fundamentally missing something here?

Firstly, the total return of Aegon Diversified Monthly Income Fund GBP B Inc was not much better than VLS 40 over the last ten years (which is all the data available):

https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000SXS5&tab=13

Secondly, whoever picked the Aegon fund said it was "a good one". You can only pick a good one after the event. You cannot predict which funds will be a good ones in the future. VLS is a reasonable choice if the risk level is suitable for you. We cannot say whether it will be good or bad though, or whether it will be better or worse than its competitors. We will only be able to make that judgement in the future, when it will be too late. What we do know is that passive funds beat most of the more expensive managed funds, and the proportion of the managed funds that are beaten increases steadily over time.

eskbanker

MarcoM said:

eskbanker said:

MarcoM said:
If one has a capital gain loss carried over from previous years I guess it make sense to generate income from selling something and then not pay tax on this compared to getting a dividend from another fund and then having to pay dividend tax?

Capital losses can't be offset against income tax, if that's what you're suggesting?

no, i am saying that if i sell some accumulation units and make a gain to fund income, i can offset the tax due on the capital gain against previous lossess, i.e. I had cineworld shares and it went bust so have lost that money, I can offset this against my capital gain

OK, I was thrown by your reference to 'generating income' but think I now see what you meant, and yes, if you have a capital loss then you can set that against a chargeable gain - there's no obligation to do so in the same tax year so you can pick and choose when it makes most sense:

https://www.gov.uk/capital-gains-tax/losses

I'm still not 100% clear exactly which two options you're comparing though, in terms of where dividends from another fund fit into a comparison?

dunstonh

And another option open to the up is bucketing.

A short term bucket in their investments covering the withdrawals (using STMM, ST Gilts/bonds and a small amount of developed equity funds -inc units) for x months worth of draws in conjunction with a cash float.   The remainder held with ratios based on the longer timescale.

aroominyork

dunstonh said:

And another option open to the up is bucketing.

A short term bucket in their investments covering the withdrawals (using STMM, ST Gilts/bonds and a small amount of developed equity funds -inc units) for x months worth of draws in conjunction with a cash float.   The remainder held with ratios based on the longer timescale.

Why are there equities in the short term bucket? I though that bucket should strictly be cash or cash-like, with longer-term/IG bonds in the middle bucket and equities in the growth one?

MarcoM

dunstonh said:

And another option open to the up is bucketing.

A short term bucket in their investments covering the withdrawals (using STMM, ST Gilts/bonds and a small amount of developed equity funds -inc units) for x months worth of draws in conjunction with a cash float.   The remainder held with ratios based on the longer timescale.

would a simpler strategy for someone be to sell part of accumulation funds which are in heavy gain (difference between value now and what was invested three years ago) and stick this in an income generating investment whic currently provides around 5%? for example a fixed rate bond? This would tie in with the solutions Linton has suggested. Said capital gain would not suffer from taxation as it is possible to claim a loss from previous years.

thunderroad88

GeoffTF said:

thunderroad88 said:

I’m not sure I get your argument. If the OP has £100k ideally in an ISA and wants £500 a month income to cover a regular expenditure, he’d be better using the Aegon fund which will deliver this income. VLS40 won’t do this with its low yield so he’ll have to sell units to achieve his income requirement. Its record suggests that after 5 years he’ll have marginally more capital growth if he’d chosen the Aegon fund too. Sure he’ll pay £370 more a year to hold the Aegon fund but he’ll more than make up for that with more income and capital growth. Or am I fundamentally missing something here?

Firstly, the total return of Aegon Diversified Monthly Income Fund GBP B Inc was not much better than VLS 40 over the last ten years (which is all the data available):

https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000SXS5&tab=13

Secondly, whoever picked the Aegon fund said it was "a good one". You can only pick a good one after the event. You cannot predict which funds will be a good ones in the future. VLS is a reasonable choice if the risk level is suitable for you. We cannot say whether it will be good or bad though, or whether it will be better or worse than its competitors. We will only be able to make that judgement in the future, when it will be too late. What we do know is that passive funds beat most of the more expensive managed funds, and the proportion of the managed funds that are beaten increases steadily over time.

But the Aegon fund WAS better than VLS and isn’t the reason you think VLS is reasonable exactly because of its history? The OP also seemed to want a decent level of income, which I think the Aegon fund should provide plus, based on its history, reasonable capital growth. Frankly, I’m not quite sure anymore what the OP wants…

GeoffTF

Here is Vanguard's recommended approach for drawing retirement income:

https://www.vanguardinvestor.co.uk/articles/latest-thoughts/retirement/flexible-approach-support-retirees-good-bad-times

MarcoM

thunderroad88 said:

GeoffTF said:

thunderroad88 said:

I’m not sure I get your argument. If the OP has £100k ideally in an ISA and wants £500 a month income to cover a regular expenditure, he’d be better using the Aegon fund which will deliver this income. VLS40 won’t do this with its low yield so he’ll have to sell units to achieve his income requirement. Its record suggests that after 5 years he’ll have marginally more capital growth if he’d chosen the Aegon fund too. Sure he’ll pay £370 more a year to hold the Aegon fund but he’ll more than make up for that with more income and capital growth. Or am I fundamentally missing something here?

Firstly, the total return of Aegon Diversified Monthly Income Fund GBP B Inc was not much better than VLS 40 over the last ten years (which is all the data available):

https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F00000SXS5&tab=13

Secondly, whoever picked the Aegon fund said it was "a good one". You can only pick a good one after the event. You cannot predict which funds will be a good ones in the future. VLS is a reasonable choice if the risk level is suitable for you. We cannot say whether it will be good or bad though, or whether it will be better or worse than its competitors. We will only be able to make that judgement in the future, when it will be too late. What we do know is that passive funds beat most of the more expensive managed funds, and the proportion of the managed funds that are beaten increases steadily over time.

But the Aegon fund WAS better than VLS and isn’t the reason you think VLS is reasonable exactly because of its history? The OP also seemed to want a decent level of income, which I think the Aegon fund should provide plus, based on its history, reasonable capital growth. Frankly, I’m not quite sure anymore what the OP wants…

op wants 5% per annum on average or thereabouts.