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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 2
    • JohnRo
    • By JohnRo 11th Jul 13, 10:41 AM
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    JohnRo
    Right, Investment trusts.. This is the interim list and I'm quite happy to admit I have limited knowledge about how IT's operate, this is simply a list I've quickly compiled based on various web searches, where they are either high in yield tables and/or rated by various pundits.

    I know it's far from comprehensive, just have to start somewhere. I need to try and weed out the less suitable candidates based on past performance, yield and value for money (the bit I don't like about IT's) and also just my general impression gleaned from reading various websites about said trust.

    As always I'll be more than happy to hear anyone else's opinion.

    At this stage as already mentioned I've switched my thinking towards holding a much larger number of investments with smaller allocations to each than the other way.

    So, the longlist

    Aberdeen Asian Income Trust
    Aberdeen Smaller Companies High Income
    Aberforth
    Acorn Income
    Artemis Alpha
    Bankers
    Blackrock World Mining Trust
    British Empire Securities & General
    City of London Trust
    Dunedin Income & Growth
    Edinburgh
    Finsbury Growth and Income Trust
    Invesco Perpetual Income & Growth IT
    Jupiter European Opportunities
    Law Debenture
    London & St. Lawrence
    Lowland Investment Company
    Murray Income Trust
    Murray International Trust
    Pacific Assets Trust
    Schroder Real Estate Investment Trust
    Scottish Mortgage Investment Trust
    Shires Income
    Standard Life Equity Income
    Temple Bar
    Troy Personal Assets Trust


    Anything blatantly obvious or personal favourites missing from this research list?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 11th Jul 13, 2:12 PM
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    JohnRo
    Hmm, the more I look at IT's the less appealing they seem to get to my uneducated eyes.

    http://citywire.co.uk/wealth-manager/investment-trusts/best-investment-trusts-by-sector.aspx?CitywireClassID=49&TimePeriod=12

    Generally they seem to have significantly higher charges, lower (quoted) yields and only slightly higher if at all performance figures. On top of that is the added layer of volatility from their share price as they fall in and out of favour.

    Am I just looking at the wrong things?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • BLB53
    • By BLB53 11th Jul 13, 8:13 PM
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    BLB53
    From your shortlist, I hold the following - I have highlighted the ones I would recommend for starters.
    Aberdeen Asian Income Trust
    Aberforth
    Bankers
    City of London Trust
    Dunedin Income & Growth
    Edinburgh
    Finsbury Growth and Income Trust
    Invesco Perpetual Income & Growth IT
    Law Debenture
    Murray Income Trust
    Murray International Trust
    Temple Bar
    Prices have risen quite a bit in recent months so it may be prudent to drip money in over a period but I think they should all do well over the longer term (10 years+)

    Good luck!
    • grizzly1911
    • By grizzly1911 11th Jul 13, 9:59 PM
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    grizzly1911
    Hmm, the more I look at IT's the less appealing they seem to get to my uneducated eyes.

    http://citywire.co.uk/wealth-manager/investment-trusts/best-investment-trusts-by-sector.aspx?CitywireClassID=49&TimePeriod=12

    Generally they seem to have significantly higher charges, lower (quoted) yields and only slightly higher if at all performance figures. On top of that is the added layer of volatility from their share price as they fall in and out of favour.

    Am I just looking at the wrong things?
    Originally posted by JohnRo
    These two have Woodford for a manager and currently have similar holdings.

    Edin and Invesco Perp High Income.

    The return shown on trustnet charting suggest total returns of 117% v 65% respectively over 5 years.

    Sorry chart/data won't link or copy.
    Last edited by grizzly1911; 11-07-2013 at 10:05 PM.
    "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
    • TCA
    • By TCA 11th Jul 13, 10:34 PM
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    TCA
    John, have you read any IT stuff on TMF? If not, try this:

    http://boards.fool.co.uk/basket-of-seven-annual-review-2013-12828989.aspx?sort=whole

    http://boards.fool.co.uk/b7-12833848.aspx?sort=whole
    Last edited by TCA; 11-07-2013 at 10:51 PM.
    • JohnRo
    • By JohnRo 12th Jul 13, 10:08 AM
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    JohnRo
    Thanks again for a good read, I am aware that my list up thread is extremely ugly, it's just a quick, fairly random collection of some trusts that appear at the top of league tables, online portfolio blogs and various websites "best" lists.

    I'm aiming at this stage to invest a ballpark 4K in each of my chosen trusts, making a selection similar to the B7 portfolio linked by TCA (which I have read before briefly) but with nine or ten trusts and lower allocations to some property trusts. Reason for more than one being to try and regulate the income stream if not the actual risk.

    I'm still reading and have a broad sense of what I want to achieve but not the technical detail of how best to do that. The discount / premium aspect is an added complication but if I can make approximately the right choices initially, that shouldn't have any great significance longer term since this portfolio is intended to be held forever and hopefully provide a worthwhile and growing income stream .

    I expect the transfer to take a good few days yet so plenty time to whittle down a final selection list. Will post my muddles in a day or two.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • Bazofts Revenge
    • By Bazofts Revenge 13th Jul 13, 4:45 PM
    • 295 Posts
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    Bazofts Revenge
    John, If you truly aren't sure what to do then I'd recommend drip feeding into some and or set up a virtual portfolio somewhere. HL one is good but doesn't take into account income. 'Google finance' portfolio adds dividends up in real time.
    Solar PV cost 5760 (15/03/13)
    FIT inc + Electricity saved 3746 (65% Paid back) Tax free
    Last update 30/09/17
    • mike88
    • By mike88 13th Jul 13, 9:17 PM
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    mike88
    All funds in your original list focus exclusively on the UK.

    Your later list includes international ITs but later you say that you are not so keen on them. So what about these international income UTs:

    M&G Global Dividend Fund A Income yielding 3.54%

    Schroder Asian Income yielding 4.55% and

    Newton Global Higher Income yielding 4.29%

    All yields are approximate.

    As for your UK income list have you considered Artemis Income Fund Class R Distribution yielding 4.6%?

    Do your own research on these funds as they are only suggestions.
    Take my advice at your peril.
    • JohnRo
    • By JohnRo 14th Jul 13, 1:09 AM
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    JohnRo
    The thing I'm absolutely sure about is wanting to get this money invested in a moderate growth portfolio that pays a sizeable but sustainable income, the more the better, obviously, but sustainable.. and the sooner the better.

    Once the transfer lands I'm in a position of losing income on it and I'm not prepared to lose the ISA wrapper so it'll need to have something done with it pretty sharpish.

    So far this is what I'm looking at and trying to pick suitable candidates. I admit I'm struggling to see any obvious choices, especially as the yields seem rather low when compared with a great many UT offerings costing the same or less.



    The IT premium is an irritation too. I may well end up just purchasing 2 or 3 trusts on the lists and plough the rest into UT investments. Then see how things start to play out with a view to transferring/purchasing more IT later.

    The other thing putting me off IT slightly is the transaction costs, whereas UT can be bought and sold as often as deemed necessary without any additional transaction costs.

    I won't "need" the income initially but the plan is to have it (the regular monthly income) available for disposal in the near future.

    ..bed time
    Last edited by JohnRo; 14-07-2013 at 1:20 AM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • grizzly1911
    • By grizzly1911 14th Jul 13, 3:25 PM
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    grizzly1911

    The other thing putting me off IT slightly is the transaction costs, whereas UT can be bought and sold as often as deemed necessary without any additional transaction costs.


    Originally posted by JohnRo

    Why would you want to keep chopping and changing your holding if you follow the right strategy in the first place?

    Some UTs like Artemis, Old Mutual have buy sell spreads. Some have less transparent charges like dilution levies. With the deal lag you may not get the price expected so there are other costs to UT dealing not just bad timing decisions.

    Some types of IT aren't available in an UT guise.

    X-O is 5.95 a trade.
    "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 15th Jul 13, 12:37 AM
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    JohnRo
    I really want these all on Charles Stanley, that means a steep 10 dealing charge currently on stock purchase/sale unfortunately.

    I'm not planning to do any chopping and changing, regular or otherwise, but clearly having that option available is sensible, be it profit taking or rebalancing if things get stretched.. obviously with IT that comes at a significant cost for smaller sums where no such direct costs are involved with (most) UT transactions.

    I don't want to (meaning I am) get too bogged down in the minutia of the selection process, I'm going to read the thread and various websites again a few times before taking the plunge, then just make a selection. The reason for including a larger number of similar IT and UT selections is mainly to regulate the income stream.

    Right now the "short" list is looking something like this, still in progress but aiming for a final selection of probably 10 to 12, with 3K in each.

    Aberdeen Dunedin Income & Growth
    Henderson City of London
    Aberdeen Murray Income
    Schroder Income Growth
    Invesco The Edinburgh
    Invesco Perpetual Income & Growth
    F&C Capital and Income
    JPM Claverhouse

    Aberdeen Asian Income
    Aberdeen Murray International
    London & St. Lawrence

    HICL Infrastructure
    F&C Commercial Property
    John Laing Infrastructure
    Amber International Public Partnerships


    The likes of Lowland, Bankers, Finsbury just don't seem to be offering the sort of yields I'm looking for in this process, I'm all ears for opinion about that though. I realise quoted yields mean very little without reference to underlying capital growth.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 15th Jul 13, 2:36 PM
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    TCA
    Are you still continuing with your portfolio of index trackers? Have to say I like the idea of an income generating portfolio as well, so am seriously considering something similar for the excessive cash I'm holding, as an alternative to ploughing more into my trackers on any market dips, as that could take forever.
    • JohnRo
    • By JohnRo 15th Jul 13, 2:45 PM
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    JohnRo
    Yes TCA, that tracker (and managed smaller cos) is a "forget about it" portfolio. This is entirely separate and something I intend taking a far more active interest in.

    ** I did move away from Vanguard to Blackrock D for quite a few of the tracker funds though.

    My Vanguard smaller cos. tracker has outperformed all the individual regional smaller cos. managed funds btw...
    Last edited by JohnRo; 15-07-2013 at 2:55 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 15th Jul 13, 3:22 PM
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    TCA
    My Vanguard smaller cos. tracker has outperformed all the individual regional smaller cos. managed funds btw...
    Originally posted by JohnRo
    As has mine. It's also outperformed all my other Vanguard regional index funds!
    • JohnRo
    • By JohnRo 15th Jul 13, 3:25 PM
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    JohnRo
    Time to abandon managed regional smaller cos. funds me thinks. Not just yet though, i'll give it another year or so to persuade me otherwise.

    My Blackrock US equity tracker is the best performing fund in that portfolio, currently. The Vanguard Smaller Cos. tracker a close second.
    Last edited by JohnRo; 16-07-2013 at 11:22 AM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 16th Jul 13, 4:44 PM
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    JohnRo
    Have to admit i'm struggling, these look the most likely at the moment bearing in mind I have LTBH growth elsewhere.

    Really can't decide on whether to include JPM mecantile, on a good discount (at time of research) and maybe drop law but want to try and balance the monthly dividends as much as possible.

    The only way I can see to solve the regular monthly income aspect (and some considerable indecision) is to have a great many of them included.

    The totals are simple non weighted averages of the entries highlighted

    Last edited by JohnRo; 16-07-2013 at 4:47 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • mike88
    • By mike88 17th Jul 13, 9:58 AM
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    mike88
    I think you have far too many holdings. My advice based on 25 years of investing experience is to hold around 2 to 3 funds in each of your investing sectors. This enables you to move quickly if the trend moves against the sectors you are holding. At some point markets in certain sectors do under perform so a nimbler portfolio is helpful in this respect.

    For example over the last 3 years the smaller companies sector has increased by 72%, the biotechnology sector by 94% while the commodities sector has fallen by 13% and the Natural Resources sector by about the same. Do you really want to hold funds in sectors that bomb so badly?

    As matters stand you have picked mainly good performing funds from league tables but please bear in mind that many of the equity income funds for example hold pretty much the same companies so the variation in performance is not always that great. I would opt for a couple of core holdings in each sector. Basically by covering all bases you are likely to end up with sectors where some funds do well and some badly creating a portfolio that in all probability will fair no better than an average performing international fund.

    Indeed, by having such a wide variation of funds you are probably more or less duplicating an international fund. Unlike your portfolio an international fund manager has the ability to move his investments to the areas that he thinks will perform best. He will certainly ditch funds in sectors that do badly.

    My advice is to ask yourself do you really need a portfolio with so many holdings?
    Take my advice at your peril.
    • JohnRo
    • By JohnRo 17th Jul 13, 11:11 AM
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    JohnRo
    Many of these IT's are well established, have stood the test of time and appear to have impressive track records to back it up.

    My limited experience tells me it's important to be diversified and hold investments in a great many sectors at all times. I do hold a larger portfolio, IFA managed, and also a globally diversified index tracking growth portfolio. Clearly some sectors do better than others at times but I don't have the time, ability or inclination to try and predict which will outperform ahead of time.

    Not knowing which sectors are going to do well ahead of time, the only way I see to capture any significant part of a sustained rise is to be in there all the time.

    This thread started because I feel that I need an independent portfolio that provides a strong sustainable income stream. Whether that can be done best with two or three holdings or a basket of many more is something I can't decide, but the requirement I'm aiming to achieve is a strong monthly income and holding a great many income IT seems to facilitate that better than holding fewer.

    I suspect you're right about holding fewer funds, for all sorts of reasons although I don't buy the nimble argument. Where else am I going to generate a regular income other than from investments designed and proven specifically to do just that?

    Perhaps a better way to skin the same cat is to invest for growth and sell the income required? That would end up being prohibitively expensive using IT though, given the dealing costs and modest sum involved.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 17th Jul 13, 11:38 AM
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    TCA
    Perhaps a better way to skin the same cat is to invest for growth and sell the income required? That would end up being prohibitively expensive using IT though, given the dealing costs and modest sum involved.
    Originally posted by JohnRo
    There's also the fact that you're using an ISA wrapper, so might not want to be selling frequently. Not necessarily of course but perhaps a consideration.
    • JohnRo
    • By JohnRo 17th Jul 13, 12:11 PM
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    JohnRo
    I'll have a year or possibly two to try and get this portfolio fine tuned, see how it's behaving and hopefully have it doing what I want it to, without needing the income. At some point though the income generated is going to need to be syphoned off. I'm aiming for a monthly 150 plus but that might be a bit ambitious.

    Were it not for the IT total performance, which is compelling, I'd be inclined to just have a higher yielding UK centric UT income portfolio with some global income funds and just rebalance when I felt it prudent. I've already done that to some extent as stated earlier but clearly the larger part of the investment is still undecided.

    Unfortunately rebalancing an IT is going to be a pricey undertaking and given the sums involved, likely to snaffle a big chunk of any gains and defeat the object of that exercise so that won't be happening. That for me is a good reason to perhaps shift towards holding fewer IT with a larger allocation to each.

    Ark makes the point, I'm probably better drawing a regular monthly income from an ISA wrapped dividend cash pool that can support it indefinitely and not worry about trying to spread dividend payouts evenly by holding an excessively large number of investments.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
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