Investment need in FTSE All World Index Fund/ETF to earn £20,000 a year

Tonys101

Hi

How much would i need invested in a FTSE All World Index Fund/ETF to earn £20,000 a year? 

Also how much would i need to leave in my investment if I took out £20,000 a year taking into account market downturns. 

I never plan to have all my money in one investment and currently don't. 

my portfolio is made up of currently 

Cash
Shares of one company  (Gotten from a employee share save scheme)
a portfolio of crypto 
HSBC all world index fund 

Just looking for some information to work off  

dunstonh

How much would i need invested in a FTSE All World Index Fund/ETF to earn £20,000 a year? 

 A yield of around 1.4% would require around £1.45m to earn £20,000 a year.

Less would be required if you decided to use total return or change your options to have higher yielding assets

eskbanker

There are so many unknowns involved (duration, tax, inflation, fees, risk tolerance, etc, etc) that it's impossible to give any sort of meaningful answer but the usual 'safe withdrawal rate' quoted in the context of pensions (i.e. when gradually depleting capital) is in 3-4% territory, so that would mean a pot of circa £500-600K to generate £20K annually on average, but exactly how you choose to take market downturns into account would influence this figure too....

Tonys101

eskbanker said:

There are so many unknowns involved (duration, tax, inflation, fees, risk tolerance, etc, etc) that it's impossible to give any sort of meaningful answer but the usual 'safe withdrawal rate' quoted in the context of pensions (i.e. when gradually depleting capital) is in 3-4% territory, so that would mean a pot of circa £500-600K to generate £20K annually on average, but exactly how you choose to take market downturns into account would influence this figure too....

Lets assume  i removed nothing 

InvesterJones

If removed nothing then you'd be largely growing capital rather than paying out dividends, but you can work out the amount required for a £20k dividend with the formula

20000 / dividendYield

So to take PRIW as an example fund, the div. yield over the last year was something like 1.65%, or 0.0165, so 20000 / 0.0165 = £1,212,121 would have been needed to distribute £20k over the last year.

But as mentioned, most of the growth will be in the value of the fund rather than being removed for dividends.

Linton

Tonys101 said:

eskbanker said:

There are so many unknowns involved (duration, tax, inflation, fees, risk tolerance, etc, etc) that it's impossible to give any sort of meaningful answer but the usual 'safe withdrawal rate' quoted in the context of pensions (i.e. when gradually depleting capital) is in 3-4% territory, so that would mean a pot of circa £500-600K to generate £20K annually on average, but exactly how you choose to take market downturns into account would influence this figure too....

Lets assume  i removed nothing 

I assume you mean that you are proposing to only take dividends..

As of right now the yield (last 12 months total dividends as a % of current price) of the HSBC FTSE All World Index Fund (Income) is 1.66%.  

If everything remained as it is now you would need a pot of £20K/1.66%=£1.2M.

However:
1) This yield is unusually low because of the boom in US Tech.  Tech shares generally dont pay high dividends.
2) Circumstances wont remain as they are now.
3) Although the dividend is low the index fund has risen in capital value by 16% in the past 12 months.  Would you ignore this?
4) Do you want the £20K/year to rise with inflation?  Ensuring that happens would change the numbers.
5) If you were wanting to live off dividends you probably would not choose a Global Index fund. My focussed income portfolio is currently returning about 6%.  Getting this amount has required both experience and research.  However I do not expect it to increase in line with inflation.

Hoenir

Linton said:

Tonys101 said:

eskbanker said:

There are so many unknowns involved (duration, tax, inflation, fees, risk tolerance, etc, etc) that it's impossible to give any sort of meaningful answer but the usual 'safe withdrawal rate' quoted in the context of pensions (i.e. when gradually depleting capital) is in 3-4% territory, so that would mean a pot of circa £500-600K to generate £20K annually on average, but exactly how you choose to take market downturns into account would influence this figure too....

Lets assume  i removed nothing 

3) Although the dividend is low the index fund has risen in capital value by 16% in the past 12 months.  Would you ignore this?

The markets have are beginning to behave in a similar fashion as they did back in 2006-2007. 

eskbanker

Tonys101 said:

eskbanker said:

There are so many unknowns involved (duration, tax, inflation, fees, risk tolerance, etc, etc) that it's impossible to give any sort of meaningful answer but the usual 'safe withdrawal rate' quoted in the context of pensions (i.e. when gradually depleting capital) is in 3-4% territory, so that would mean a pot of circa £500-600K to generate £20K annually on average, but exactly how you choose to take market downturns into account would influence this figure too....

Lets assume  i removed nothing 

It would make far more sense to clearly define what you're trying to achieve, rather than embarking on another thread that goes round in hypothetical circles while people try to interpret and guess what you're actually getting at!  If you're not trying to generate accessible income, why would there be any relevance in how much to invest to deliver a target annual growth figure?

Tonys101

I am simply asking , how much would I need to have  invested to earn £20,000 in a world index fund/etf 

I don't get this 1.6% your tallking about where is that number coming from?

HSBC all world is up this much see below 

Basicly what is the average it goes up by each year 

InvesterJones

Tonys101 said:

I am simply asking , how much would I need to have  invested to earn £20,000 in a world index fund/etf

I don't get this 1.6% your tallking about where is that number coming from?

HSBC all world is up this much see below 

Basicly what is the average it goes up by each year

Now you're asking a different question. The average it has gone up by is clearly shown in your screenshot above - to average 5 years sum all those values and divide by 5.

Tonys101

google says this just wanted other peoples advice/information