Income Fund suggestions for SIPP

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  • MK62
    MK62 Posts: 1,718 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    Linton said:
    Linton said:
    Linton said:

    Bostonerimus1 said:
    What's income? Interest, dividends, capital gains and maybe even spending some capital. So one way to generate those is a balanced portfolio of equities, bonds and cash. Take a look at "Total Return". 

    An income fund is one that produces a steady and regular set of cash payments over time higher than the market average. This can be contrasted with a growth fund with an objective of increasing capital value over the longer term.

    Generally capital value is far more volatile over the short and medium terms than income but may lead to higher long term returns.

    Which type of fund is most appropriate depends on your objectives.
    My post was attempting to get the OP to step back and look at how income is generated. A multi-asset income fund or investment trust is generating income form the usual sources, and then doling it out to the owner. I think of it as a "capacitor" or "reservoir" that takes in various income sources and provides a single stable income stream.
    Yes, I agree a multi-asset income fund may be a reasonable option in some circumstances though I have no idea how stable their income is.

    One concern is that the assets being allocated may not be best suited for higher income.  For example very safe bonds would probably strongly outweigh corporate bonds and interesting niche options like REITs and Infrastructure would be almost entirely ignored.

    Perhaps more research is neded.


    Historically you might have had savings, a bond ladder and some utility and dividend stocks. Then financial companies developed ITs and mutual funds with assets focused on income and people also developed portfolios that might include dividend indexes, REITs and bond indexes to manage themselves. More recent retirement "income" generating methods use a total return approach that has more of a capital growth emphasis, while also including dividends and interest etc. Of course the ultimate in stable income would be an annuity.
    In the UK retirement significantly funded by investment income  from pension assets has only been practicable for most people since around 2015 because of legal restrictions. So there is very little real experience of how to manage it successfully in a UK environment.  Furthermore since 2015 there has not been a serious equity crash where alternative strategies can be compared,

    You have to define success though, before you can know if you are "managing successfully".......and there's currently no real consensus on that.
  • Linton
    Linton Posts: 18,040 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    MK62 said:
    Linton said:
    Linton said:
    Linton said:

    Bostonerimus1 said:
    What's income? Interest, dividends, capital gains and maybe even spending some capital. So one way to generate those is a balanced portfolio of equities, bonds and cash. Take a look at "Total Return". 

    An income fund is one that produces a steady and regular set of cash payments over time higher than the market average. This can be contrasted with a growth fund with an objective of increasing capital value over the longer term.

    Generally capital value is far more volatile over the short and medium terms than income but may lead to higher long term returns.

    Which type of fund is most appropriate depends on your objectives.
    My post was attempting to get the OP to step back and look at how income is generated. A multi-asset income fund or investment trust is generating income form the usual sources, and then doling it out to the owner. I think of it as a "capacitor" or "reservoir" that takes in various income sources and provides a single stable income stream.
    Yes, I agree a multi-asset income fund may be a reasonable option in some circumstances though I have no idea how stable their income is.

    One concern is that the assets being allocated may not be best suited for higher income.  For example very safe bonds would probably strongly outweigh corporate bonds and interesting niche options like REITs and Infrastructure would be almost entirely ignored.

    Perhaps more research is neded.


    Historically you might have had savings, a bond ladder and some utility and dividend stocks. Then financial companies developed ITs and mutual funds with assets focused on income and people also developed portfolios that might include dividend indexes, REITs and bond indexes to manage themselves. More recent retirement "income" generating methods use a total return approach that has more of a capital growth emphasis, while also including dividends and interest etc. Of course the ultimate in stable income would be an annuity.
    In the UK retirement significantly funded by investment income  from pension assets has only been practicable for most people since around 2015 because of legal restrictions. So there is very little real experience of how to manage it successfully in a UK environment.  Furthermore since 2015 there has not been a serious equity crash where alternative strategies can be compared,

    You have to define success though, before you can know if you are "managing successfully".......and there's currently no real consensus on that.
    Yes, very true.  Different objectives lead to different strategies.

     For investing during retirement, success could initially be defined as something like meeting one's planned expenditure for the rest of one's life..

    One of course may have other objecrtives such as a large inheritance for the kids.  If the objectives are very different I would argue for the use of separate portfolios with very different strategies..  Otherwise it is more difficult to implement any trade-offs you wish to make.  WIth separate portfolios you simply move assets from one to another in line with the relative importance of the objectives.
  • Nick_Dr1
    Nick_Dr1 Posts: 79 Forumite
    Second Anniversary 10 Posts

    Yes agreed. There's almost half a century of experience with retirement funding from DC pension investments in the US since the "401k" was developed in the mid 1970's and naturally most of the dogma comes from US sources and many people successfully use "Total Return" and G-K/4% withdrawal strategies. The difficulty in assessing any approach to retirement income is choosing the criteria for evaluation and the impact of the individual investor on the outcomes. I'm well steeped in the "Total Return" approach and index funds and I'm continuing to get more than 8% average annual return and have a cash spending buffer, however, while I'm pretty sure I could fund my retirement from withdrawals from my investments I went with a  conservative approach to income relying in DB pensions, rental income and eventually state pensions. It will be interesting to see how things develop in the UK.
    Interesting, but was wondering what advantage these technical approaches have, given that the average stockmarket returns are regularly quoted as 9% or so. A simplistic approach would be to say that an index tracker that that 9% relates to would be a long term solution and doesn't need any of these technical details. I guess its all to do with averages, and a bad starting year would make it difficult to recover if that is the only source of income? But with a reasonable cash buffer you'd probably be alright? I suppose the word "probably" is the kicker!
    Your approach does the job though, probably without the stress a highly sweated portfolio would generate.
  • Bostonerimus1
    Bostonerimus1 Posts: 1,355 Forumite
    1,000 Posts First Anniversary Name Dropper
    edited 26 June 2024 at 1:38PM
    Nick_Dr1 said:

    Yes agreed. There's almost half a century of experience with retirement funding from DC pension investments in the US since the "401k" was developed in the mid 1970's and naturally most of the dogma comes from US sources and many people successfully use "Total Return" and G-K/4% withdrawal strategies. The difficulty in assessing any approach to retirement income is choosing the criteria for evaluation and the impact of the individual investor on the outcomes. I'm well steeped in the "Total Return" approach and index funds and I'm continuing to get more than 8% average annual return and have a cash spending buffer, however, while I'm pretty sure I could fund my retirement from withdrawals from my investments I went with a  conservative approach to income relying in DB pensions, rental income and eventually state pensions. It will be interesting to see how things develop in the UK.
    Interesting, but was wondering what advantage these technical approaches have, given that the average stockmarket returns are regularly quoted as 9% or so. A simplistic approach would be to say that an index tracker that that 9% relates to would be a long term solution and doesn't need any of these technical details. I guess its all to do with averages, and a bad starting year would make it difficult to recover if that is the only source of income? But with a reasonable cash buffer you'd probably be alright? I suppose the word "probably" is the kicker!
    Your approach does the job though, probably without the stress a highly sweated portfolio would generate.
    I agree with your sentiments towards simplicity and that's what I've done with my investments in retirement. My post retirement portfolio is very similar to what I had while I was working, I have the same basic index funds and in fact it now has a higher equity allocation because I've stopped rebalancing. However, just staying invested in growth equities does come with risk and volatility and a lot of the "technical" things you mention are efforts to dampen the volatility of your income stream. It takes a lot of intestinal fortitude to keep taking income from a portfolio if you see it falling by 25%. I'm not a great example as I don't use my portfolio for income and so can emphasize long term growth without worrying about short term volatility, but plenty of people in the US do use a similar growth portfolio combined with a cash buffer and social security to fund retirement. Conversely plenty of Americans also use annuities and income funds containing bonds and dividend stocks.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
  • MK62
    MK62 Posts: 1,718 Forumite
    Seventh Anniversary 1,000 Posts Name Dropper
    Linton said:
    MK62 said:
    Linton said:
    Linton said:
    Linton said:

    Bostonerimus1 said:
    What's income? Interest, dividends, capital gains and maybe even spending some capital. So one way to generate those is a balanced portfolio of equities, bonds and cash. Take a look at "Total Return". 

    An income fund is one that produces a steady and regular set of cash payments over time higher than the market average. This can be contrasted with a growth fund with an objective of increasing capital value over the longer term.

    Generally capital value is far more volatile over the short and medium terms than income but may lead to higher long term returns.

    Which type of fund is most appropriate depends on your objectives.
    My post was attempting to get the OP to step back and look at how income is generated. A multi-asset income fund or investment trust is generating income form the usual sources, and then doling it out to the owner. I think of it as a "capacitor" or "reservoir" that takes in various income sources and provides a single stable income stream.
    Yes, I agree a multi-asset income fund may be a reasonable option in some circumstances though I have no idea how stable their income is.

    One concern is that the assets being allocated may not be best suited for higher income.  For example very safe bonds would probably strongly outweigh corporate bonds and interesting niche options like REITs and Infrastructure would be almost entirely ignored.

    Perhaps more research is neded.


    Historically you might have had savings, a bond ladder and some utility and dividend stocks. Then financial companies developed ITs and mutual funds with assets focused on income and people also developed portfolios that might include dividend indexes, REITs and bond indexes to manage themselves. More recent retirement "income" generating methods use a total return approach that has more of a capital growth emphasis, while also including dividends and interest etc. Of course the ultimate in stable income would be an annuity.
    In the UK retirement significantly funded by investment income  from pension assets has only been practicable for most people since around 2015 because of legal restrictions. So there is very little real experience of how to manage it successfully in a UK environment.  Furthermore since 2015 there has not been a serious equity crash where alternative strategies can be compared,

    You have to define success though, before you can know if you are "managing successfully".......and there's currently no real consensus on that.
    Yes, very true.  Different objectives lead to different strategies.

     For investing during retirement, success could initially be defined as something like meeting one's planned expenditure for the rest of one's life..
    True, but that's more managED successfully, rather than managING successfully......and is backward looking. Surely one needs targets/objectives along the way to know if you are on course to meet this ultimate objective.....(ie, to know if you are managing successfully).
    For example, you might decide that if the indexed value of your portfolio is above 67% of the starting value, 10 years into a 30 year plan, then you are on course........
  • Beddie
    Beddie Posts: 968 Forumite
    Part of the Furniture 500 Posts Photogenic Name Dropper
    Back to the OP's question...

    JPMorgan Global Growth & Income investment trust is designed to pay regular dividends and has a good long term record.

    https://www.trustnet.com/factsheets/T/ff07/jpmorgan-global-growth-&-income-plc/

    Perhaps useful as part of a portfolio. But I have the same question myself - I don't take income now, but what's the best way further down the line? A mix of investments, some growth, some income generating. Or investment trusts designed to pay an income, such as the above. I guess it also depends on what stable income, e.g. pension, you already have.
  • Bostonerimus1
    Bostonerimus1 Posts: 1,355 Forumite
    1,000 Posts First Anniversary Name Dropper
    edited 26 June 2024 at 9:12PM
    Beddie said:
    Back to the OP's question...

    JPMorgan Global Growth & Income investment trust is designed to pay regular dividends and has a good long term record.

    https://www.trustnet.com/factsheets/T/ff07/jpmorgan-global-growth-&-income-plc/

    Perhaps useful as part of a portfolio. But I have the same question myself - I don't take income now, but what's the best way further down the line? A mix of investments, some growth, some income generating. Or investment trusts designed to pay an income, such as the above. I guess it also depends on what stable income, e.g. pension, you already have.
    "Best" isn't really the right way to look at it. There are a wide range of solutions and what matters is finding one that makes you comfortable. I use pensions and rent for my income and so I'm fine with a risky equity portfolio as I'm mostly concerned with growth. If you can find a couple of investment trusts that pay dividends that will meet your income needs then that seems like a simple solution for your core income, but I'd try to maintain some growth component to keep up with inflation and personally I'm not a fan of the fees or active management that comes with many such income funds...which is another reason I just stay mostly invested in equity index funds.
    And so we beat on, boats against the current, borne back ceaselessly into the past.
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