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  • FIRST POST
    • JohnRo
    • By JohnRo 20th Jun 13, 1:38 PM
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    JohnRo
    Monthly income
    • #1
    • 20th Jun 13, 1:38 PM
    Monthly income 20th Jun 13 at 1:38 PM
    Looking for some direction, how best to set up a solid portfolio for maximising reliable monthly income? I've looked at model portfolios and "best" lists until my head spins...

    I want to avoid individual shares due to transaction costs and their perceived higher risk but willing to listen to views on that. Many of the collective UK income funds I've looked at do seem remarkably similar. Is there any real advantage to be gained by selecting any more than one good fund, perhaps overcomplicating something that only really requires picking one and just getting on with it?

    At the moment I'm leaning towards picking just the one fund and ploughing the monthly income back in initially, to boost the pot, but with a view to then taking a regular income in a year or two. The only goal at this stage is to provide a strong but sustainable income for incomes sake for ever.

    I have a - relatively - large LTBH growth portfolio elsewhere. I am looking at this in complete isolation and purely as an alternative to cash savings (save for the emergency fund)

    The fund I've considered perhaps most suitable is the IP Distribution Z fund but I have to admit I'm a little uneasy about the level of bond exposure there. Also the yield seems a little low compared to some but I do wonder about the sustainability and capital preservation of funds claiming yields of 7% or more.

    Any suggestions or ideas folks?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
Page 1
    • kidmugsy
    • By kidmugsy 20th Jun 13, 3:15 PM
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    kidmugsy
    • #2
    • 20th Jun 13, 3:15 PM
    • #2
    • 20th Jun 13, 3:15 PM
    Don't Alliance Trust do a monthly income fund?
    • JohnRo
    • By JohnRo 20th Jun 13, 3:22 PM
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    JohnRo
    • #3
    • 20th Jun 13, 3:22 PM
    • #3
    • 20th Jun 13, 3:22 PM
    They do, I haven't studied it, will take a look but it doesn't appear to do anything that the IP fund doesn't do better.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • grizzly1911
    • By grizzly1911 20th Jun 13, 4:41 PM
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    grizzly1911
    • #4
    • 20th Jun 13, 4:41 PM
    • #4
    • 20th Jun 13, 4:41 PM
    Does it have to be monthly, what about quarterly?

    If you don't want the bonds what about IPHI and IPI, together their dividends pay quarterly Lower yield but overall performance "matches" or surpasses..
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
    • JohnRo
    • By JohnRo 9th Jul 13, 12:19 PM
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    JohnRo
    • #5
    • 9th Jul 13, 12:19 PM
    • #5
    • 9th Jul 13, 12:19 PM
    So here's a list of the funds that I've been considering. I confess I'm finding it very difficult to select any sort of "winner", performance figures are from trustnet but I don't hold any great faith in their relevance going forward. The yield figures will probably be wildly inaccurate too looking forward.



    Question, is it complete and utter madness to consider making an allocation to a great many, if not most or even all, of these funds in an income portfolio and then just tinker with the weighting as they begin to fluctuate in value and yield?

    The rationale being they will all (where similar) probably swap places with each other in total return performance table terms over a period of several years. The regular income not required for spending can be used to purchase more of the fund(s) performing least well to try and boost income and perhaps adjust the perceived risk longer term.
    Last edited by JohnRo; 14-07-2013 at 10:47 AM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • kidmugsy
    • By kidmugsy 9th Jul 13, 12:38 PM
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    kidmugsy
    • #6
    • 9th Jul 13, 12:38 PM
    • #6
    • 9th Jul 13, 12:38 PM
    Question, is it complete and utter madness to consider making an allocation to a great many, if not most or even all, of these funds in an income portfolio and then just tinker with the weighting as they begin to fluctuate in value and yield?
    Originally posted by JohnRo
    A good way to make more money without extra risk is by minimising your taxes. I'd start by ensuring that bonds or bond funds were held in ISAs: I wouldn't spend ISA capacity on shares until I had all the bonds I wanted.

    Then I'd try to spread the dividend dates so that I got a monthly income, as you clearly intend. For equities I'd use Investment Trusts rather than OEICs. And I'd reckon that I'd need one whale of a strong reason to use any more than eight: you can't really keep an eye on them if you have too many.
    • JohnRo
    • By JohnRo 9th Jul 13, 12:53 PM
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    JohnRo
    • #7
    • 9th Jul 13, 12:53 PM
    • #7
    • 9th Jul 13, 12:53 PM
    This portfolio will be ISA wrapped, approx. 50K value. Aiming for upwards of 150 plus a month income and keeping up with inflation.

    I have other growth investments but I want this exclusively for monthly income. Really need to look at income trusts, it's something I tend to glance at then over look. I'm shying away from holding bonds in any significant amounts.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • planteria
    • By planteria 9th Jul 13, 6:57 PM
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    planteria
    • #8
    • 9th Jul 13, 6:57 PM
    • #8
    • 9th Jul 13, 6:57 PM
    I wouldn't spend ISA capacity on shares until I had all the bonds I wanted.
    Originally posted by kidmugsy
    i am interested in this kidmugsy. can you explain more, and why you say this? and what about at this very moment, being told that the bond bubble is due a burst?
    • Bazofts Revenge
    • By Bazofts Revenge 9th Jul 13, 8:31 PM
    • 295 Posts
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    Bazofts Revenge
    • #9
    • 9th Jul 13, 8:31 PM
    • #9
    • 9th Jul 13, 8:31 PM
    You said that you didn't want to invest in individual companies due to dealing costs. If you're intending to hold these for a longtime then the dealing cost plus stamp duty won't be much and there's negligible annual charge. Using an extreme example of just buying into 10 companies would cost 109.50 in dealing charges and 250 in Stamp Duty. That comes to a charge of just 0.7%. Holding the Shares in an ISA may cost an additional 72 a year which equates to about 0.1% annual charge.

    This is what I can see from my experience which isn't much but you did ask. I've gone down this line with slightly more capital but I am in a similar position with a reasonable FS Pension waiting for me.

    I prefer this option as I chose my portfolio and in my case it is more a case of choosing who not to invest in. Of the many UK income Funds I've looked at their top 10 investments had a similar percentages in companies I've chosen.

    Supposedly this is high risk but so is getting up on a morning..
    Solar PV cost 5760 (15/03/13)
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  • innovate
    Using an extreme example of just buying into 10 companies would cost 109.50 in dealing charges and 250 in Stamp Duty. That comes to a charge of just 0.7%. Holding the Shares in an ISA may cost an additional 72 a year which equates to about 0.1% annual charge.
    Originally posted by Bazofts Revenge
    How much are you investing in what companies, when, how do you spread your investment across the companies?
    • Bazofts Revenge
    • By Bazofts Revenge 9th Jul 13, 9:39 PM
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    Bazofts Revenge
    How much are you investing in what companies, when, how do you spread your investment across the companies?
    Originally posted by innovate
    I was working off the OP's figure of 50k, As for companies well that would be for the OP to chose, Yeild. Cover, Whether the dividends are growing and whether he likes them.... I was just trying to give a view of basic costs. I wouldn't go for just 10 personally but it made the maths easier.
    Last edited by Bazofts Revenge; 09-07-2013 at 9:43 PM. Reason: Forgot to answer one of the questions
    Solar PV cost 5760 (15/03/13)
    FIT inc + Electricity saved 3746 (65% Paid back) Tax free
    Last update 30/09/17
    • kidmugsy
    • By kidmugsy 9th Jul 13, 10:13 PM
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    kidmugsy
    i am interested in this kidmugsy. can you explain more, and why you say this? and what about at this very moment, being told that the bond bubble is due a burst?
    Originally posted by planteria
    Personally I wouldn't buy bonds for the reason you say. But if someone is keen to, then an ISA is where to do it because the interest payment is tax-free in an ISA. With equities, the dividend gains no advantage from being in an ISA if you are a 20% income tax payer. Even if you are a 40% payer, equity dividends suffer less from being received outside an ISA than bond interest does.
    • grizzly1911
    • By grizzly1911 9th Jul 13, 11:56 PM
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    grizzly1911
    As you wish to focus on UTs another to consider for spread is Newton Global High Income.

    Have you considered infrastructure ITs - HICL, JLIF, INPP?

    Edit:- Fidelity Money Builder Balanced maybe a catch all - the MB Income has taken a bit of a knock recently.
    Last edited by grizzly1911; 10-07-2013 at 12:09 AM.
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
    • JohnRo
    • By JohnRo 10th Jul 13, 9:43 AM
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    JohnRo
    Taking on board the comments above, for better or probably worse knowing me, I have made the first tranche of investments in this years ISA.

    1000 Invesco Perpetual Distribution Z Inc.
    1000 Invesco Perpetual Monthly Income Plus Z Inc.
    2000 JOHCM UK Equity Income A Inc.
    2000 Jupiter Strategic Bond I Inc.
    1000 Kames High Yield Bond B Inc.
    2000 Schroder Income Maximiser Z Inc.
    2000 Threadneedle Global Equity Income Z Inc.

    I'm aiming to maintain a float of two to three thousand held in cash on the account for buying any significant dips. It's not ideal but given savings rates elsewhere... the transfer of the remaining 40K is not yet complete.

    A Property IT is something I will look at. I am stuck in the stock/bond mentality though. I have LTBH property growth (in theory) funds elsewhere but I have read IT information showing good income from property.

    In truth I'm still leaning towards a larger stable of funds, at least to start and then let things evolve rather than heavy investment in a concentrated few, still don't know quite what to do for the best regards bond allocation. I see the argument for their inclusion and the reliable income they provide which could feed stock income fund purchases when they're on a relative discount.

    Well, I'm not aiming for perfection so will be quite content to settle for moderate performance long term, which is probably the best I can ever hope to achieve anyway with this type of investing.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • grizzly1911
    • By grizzly1911 10th Jul 13, 1:05 PM
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    grizzly1911
    So here's a list of the funds that I've been considering. I confess I'm finding it very difficult to select any sort of "winner", performance figures are from trustnet but I don't hold any great faith in their relevance going forward. The yield figures will probably be wildly inaccurate too looking forward.




    .
    Originally posted by JohnRo
    Is this your own spreadsheet or is it a download from a somewhere like H_L?
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
    • JohnRo
    • By JohnRo 10th Jul 13, 1:12 PM
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    JohnRo
    Just one I compiled in open office - the numbers are pulled from trustnet and the OCF and yield figures cross referenced with Charles Stanley's website. I don't hold any great faith in the quoted yields though, that's something I'll have to discover as the months and years roll by. Some of the annualised returns may be a bit off too since i might have forgotten to switch to "reinvestment off" for one or two funds when pulling those numbers.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • grizzly1911
    • By grizzly1911 10th Jul 13, 1:18 PM
    • 9,818 Posts
    • 11,414 Thanks
    grizzly1911
    Just one I compiled in open office - the numbers are pulled from trustnet and the OCF and yield figures cross referenced with Charles Stanley's website. I don't hold any great faith in the quoted yields though, that's something I'll have to discover as the months and years roll by. Some of the annualised returns may be a bit off too since i might have forgotten to switch to "reinvestment off" for one or two funds when pulling those numbers.
    Originally posted by JohnRo

    Thanks I was just hoping I could shortcut the work needed as it was a nice succint summary.
    "If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....

    "big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham
    • BLB53
    • By BLB53 10th Jul 13, 6:12 PM
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    BLB53
    I would seriously look at a number of investment trusts - City of London, Murray Income, Murray International etc.

    OK share prices have risen in recent months but you should easily be able to secure a solid 4% for starters and this will rise in line with inflation each year.

    Here's a recent article on diy investor using ITs for income which may help
    http://www.diyinvestoruk.blogspot.co.uk/2013/04/investing-for-income-part-2.html
    • JohnRo
    • By JohnRo 10th Jul 13, 6:55 PM
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    JohnRo
    What is the reasoning for the two IP funds?
    Originally posted by Ark Welder
    Nothing more than wanting to compare the two, real world, side by side and decide whether one is clearly better than the other.

    Thanks for taking time to make a thoughtful post, it's great reading.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 10th Jul 13, 6:58 PM
    • 2,608 Posts
    • 2,421 Thanks
    JohnRo
    I would seriously look at a number of investment trusts - City of London, Murray Income, Murray International etc.

    OK share prices have risen in recent months but you should easily be able to secure a solid 4% for starters and this will rise in line with inflation each year.

    Here's a recent article on diy investor using ITs for income which may help
    http://www.diyinvestoruk.blogspot.co.uk/2013/04/investing-for-income-part-2.html
    Originally posted by BLB53
    Thanks for this, I do intend to make IT purchases. Been looking at those mentioned and others.

    There will be an IT property element too.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
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