ETF Accumulating and ETF Distributing Investment timing switch

SilverOx

Good morning,

Canvassing opinions on my situation.

Just to begin with a quick background. I'm 53, retiring at 60 and my pension will currently support that.

I have been investing for the last 4 years by the way of SAYE shares which have been diversified into global ETFs which are accumulating and are within a stocks and shares ISA . By the end of the year the portfolio will be worth £50k.

The plan is to get this to at least 100k by my retirement for just some flexible income which will supplement my pension.

I was going to swap out the global accumalating etfs, focused on growth for a mix of distributing etfs and investment trusts.

My question is, do I keep growing my current portfolio as planned and swap over in 7 years time or start investing in the distributing ETFs and investment trusts now and then move over the invested accumalating ETFs. I potentially would keep investing the dividends after 60 dependant on the future.

Maybe overthinking?

GeoffTF

https://forums.moneysavingexpert.com/discussion/6681005/etf-accumulating-and-etf-distributing-investment-timing-switch

It would be better to do nothing. Switching to distributing ETFs would be pointless. Switching to ITs would add additional costs.

Linton

Swap over when you needs change but I dont see the point of switching from accumulating ETFS into distributing ETFs. If you want income, buy a set of diversified funds that specialise on income.

SilverOx

https://forums.moneysavingexpert.com/discussion/comment/82115349#Comment_82115349

The thinking behind the switch is to draw a small additional income but maintain the portfolio and possibly add to it, rather than to sell for income.

masonic

You say you "potentially would keep investing the dividends after 60 dependant on the future". So why not avoid spread and transaction fees and leave as is. If you need to sell units, then you can do so once to release the right amount of cash to top up your reserves, rather than get an arbitrary amount that may be unneeded or not enough.

dunstonh

You haven't said what portfolio strategy you will be using. If its total return, then it makes no difference. If its yield only, then you will need to make the switch at some point. If you are factoring in bucketing (which is usually a good idea with total return), then that needs to be taken into account.

Total return can work with income and accumulation units. The platform you use could have an influence as different software offers different options and functionality.

SilverOx

https://forums.moneysavingexpert.com/discussion/comment/82115455#Comment_82115455

This would be (ideally) supplemental and not relied upon so the amount can be arbitrary and would be spent or reinvested. That's the idea anyway.

EthicsGradient

If you are still contributing new money (and to go from 50k to over 100k in 7 years, you probably need to - doubling in 7 years needs an average annual 10% return, which might happen, but might well not), and the distributing ETFs you're considering follow the same indices as your existing accumulating ETFs, then you may as well start buying them now, and reinvest the income you get from them into them too. This then means you will reach 60 with some income units, and won't have to sell and buy to get them.

The ITs are presumably not tied to the same indices. If you're convinced they will still be what you want in 7 years' time, then there is an argument for making those what you buy with contributions from now - build them up gradually, rather than timing a single switch into them at the point you turn 60. Do you think the ITs will roughly match the ETFs for total return and diversification? Or will they favour one over the other?

SilverOx

https://forums.moneysavingexpert.com/discussion/comment/82115457#Comment_82115457

The strategy would be yield only by the time I'm 60.

The idea was to grow the accumulating global etf then switch.

I use trading 212.

Part of the reason for the post was to decide whether to start investing in the income driven ETFs and investment funds now or keep building the accumulating ETF and switch all at once.

SilverOx

https://forums.moneysavingexpert.com/discussion/comment/82115499#Comment_82115499

Yes, still contributing with a target of at least another 50k.

The reason for possibly including the ITs was to minimise the risk and income versus the global ETFs. VHYL as one of the options for the global ETF and CTY as one of the options for IT (I know it's not global but just an example).

GeoffTF

Trading costs money. When private investors switch investments, the investment that they sell does better than the investment that they buy more often than not. Every time you trade you risk making a mistake. Even if what you did was a good idea, circumstances can change. Do as little as you reasonably can.