Lifestyle income or accumulation?

Blackavar · 15 May 2018 at 3:18PM

Preparing to be shot to bits on this but need to understand the difference.
Me and her both have a range of vanguard LS funds in a S&S ISA each. These are all accumulation funds as I am building to use in conjunction with SP and private pension when the day arrives.
However as she sees her value gradually increase, she wants to ‘take a bit of profit’ now and then.
So, I am thinking, maybe she needs to change some to income accounts which I understand would pay out sometimes but can’t find out when.
I have explained the downside of selling units, depleting the amount owned etc but she is keen to get a bit of income now and then.
Any constructive input gratefully received.

MallyGirl · 15 May 2018 at 3:25PM

or she could just sell some units when she wants income.
If you have inc then it will probably cost you (in transaction fees) to reinvest that income when you don't want to cream it off

ColdIron · 15 May 2018 at 3:38PM

Vanguard's LifeStrategy pays quite a bit less than 2% interest so not much of a source of income and as it's paid annually at the end of May it is even less suitable. Are you sure she is really as committed as you are to providing for her retirement? I'd stick with the Acc funds and just sell down periodically so that the ravaging effect of using something she is paying into for provision in older age for a short term benefit can easily be seen

Blackavar · 15 May 2018 at 4:07PM

Yes Malleygirl will cost to reinvest. Planning to sell every time it makes £500 and buy more up to isa limit.

bowlhead99 · 15 May 2018 at 7:31PM

Blackavar wrote: »

. Planning to sell every time it makes £500 and buy more up to isa limit.

Why sell if you're going to rebuy? Why not keep what you've got, and then you don't need to put any more money in to use up any more limit?

The ISA limit only gets used up when you bring more new money in from outside the ISA into the ISA. Merely buying and selling within the ISA doesn't use up the annual subscription allowance.

Effectively when she takes money out of the fund (whether by dividend income or just by selling a bit... she's getting paid, but she's paying herself with her own money. When she gets her money in her hand, she doesn't have it in her fund any more.

It might feel nice to "get a bit of income every so often", and who doesn't want that

- but when ultimately the destination of the money taken out of the ISA is... the ability to have some spare money on hand, to be able to afford to put money into her ISA... It's the kind of psychological trick that doesn't really stand any scrutiny.

Blackavar · 15 May 2018 at 10:14PM

Yes, as soon as I posted sell, then buy more I knew it was nonsense so thanks for confirming !!!55357;!!!56898; But is there a practical methodology to buy more funds with the perceived !!!8216;profit!!!8217; made in the ISA? My guess is no - just hang on to them until cash is needed. She can see a £500 !!!8216;profit!!!8217; sat in her account (that I strongly encouraged her to open BTW) and wants the cash.
I have explained it!!!8217;s not like a bank account and she will be eroding the earning potential. Will have another chat ........over a glass of wine or two !!!55357;!!!56848;

MallyGirl · 15 May 2018 at 10:55PM

As long as she is also prepared to put £500 back in when prices drop and it has made a loss then all will be well. That is why you need to leave it alone for 10 years to weather the ups and downs and come out (hopefully) on top

Lifestyle income or accumulation?

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