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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 3
    • JohnRo
    • By JohnRo 18th Jul 13, 1:07 AM
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    JohnRo
    Thanks again for taking the time, much of that chimes.

    I've shared similar thoughts on many of the points you raise, especially the last paragraph. There is a glimmer of method to the madness, I'm just not sure the pot is big enough at this stage to have that many IT investments and be efficient when it comes to moving parts of it around or as I am prone to do from time to time, take a reasonable profit as and when it presents with a view to reinvesting later at a discount. I've tended to do this when funds start showing 20% gains in short time frames on the basis that's in line with at least a couple of years worth of acceptable growth to me personally and should provide an opportunity at some point to reinvest at a discount. It's not very scientific but it is what it is.

    The whole rebalancing discussion is only related to my somewhat misguided intention of having many funds with different dividend dates combined to provide a fairly smooth monthly income. Rebalancing to lift or lower a payout on certain months if required, far more easily said than done, as opposed to just having a larger cash pool buffer from which monthly income is taken. That now seems a far better way to proceed and a larger cash pool allows opportunistic buying without having to sell.

    I think a compromise of initially investing larger amounts in a smaller number of perhaps three or four good solid growth and income IT with slightly lower yields but with strong dividend growth potential, is the way to go all things considered, and then have the remaining balance in a cash pool and UT to feed them.

    Perhaps the way forward is not to try and do everything in one go but allow things to develop. I've got about another 10 days before the transfer lands.
    Last edited by JohnRo; 18-07-2013 at 1:13 AM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 18th Jul 13, 12:53 PM
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    JohnRo
    This is close to my final choice now, it feels this is about right for me. Based on an aggregate sense (as I see it) of fair value, sustainable dividend with good dividend growth prospects, decent income, cheap running costs, good track record and generally well regarded investments. Sacrificed some immediate income to better long term prospects for income growth.



    Very difficult for me to assess how many of these numbers are painted on boats that have sailed but prepared to get on board with these and see where it goes.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 19th Jul 13, 12:46 PM
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    TCA
    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.
    Originally posted by JohnRo
    This is close to my final choice now....
    Originally posted by JohnRo
    The notion of using unit trusts completely binned now then John?
    • JohnRo
    • By JohnRo 19th Jul 13, 1:17 PM
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    JohnRo
    Nothing is ruled out, the simple truth is that I don't know exactly what to do for the best so have to make a start somewhere.

    I'll probably buy the Henderson UK income UT and leave a cash pool of around 3-4K which feels like a ridiculous thing, having such an amount sat earning almost nothing after years of jumping through hoops chasing fractions of a percent in savings accounts, but it will allow a cash pool for income withdrawal, emergency use and hopefully some opportunistic buying and selling.

    The list of investments I'm choosing will have several IT missing that I'd really rather have included in an ideal world but the choice of a lower starting yield for what I hope and expect to be longer term increases in income and the growth needed to feed it seems the right way at this point.

    The next lot of purchases will be the IT investments but I'm finding making the final choice incredibly difficult. Almost every time I look I start doubting the selection and looking at others on the list. Not wanting to change those selected but to include those excluded.

    So I'll buy these based on selection criteria
    Henderson City of London
    Standard Life Equity Income
    Aberdeen Asian Income
    Investec Temple Bar
    Henderson Lowland
    JPM Mercantile
    Henderson Bankers

    But I have to admit I'm uneasy about not having included these

    London & St. Lawrence
    Edinburgh
    Murray International
    Law Debenture
    Finsbury

    these can all be included at a later date though if I can find the money to make these purchases in the next few years.

    The backdrop to all this is that the damned markets are sky high right now but I'm comfortable with equities and that it's the right asset class to be invested in over the next several years. How's that for tempting fate and a huge kick in the teeth...
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 21st Jul 13, 7:38 PM
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    JohnRo
    The transfer landed Saturday.. (Gulp)

    Decision made, 10 trusts... for richer or poorer.

    Blue are UT and already purchased
    Yellow are IT and order going in tomorrow



    Just over 140 a month, won't need to touch it for a few months at least. No doubt the reality won't quite measure up to the planning but here goes nothing.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 21st Jul 13, 8:35 PM
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    TCA
    Well done John and good luck. Let's hope fortune favours the brave! I need to get my own act together and do likewise as my cash at a current pre-tax rate of 2% is a waste (IMO). Very wary though given the present sky-high prices you mentioned and the fact my only other major lump sum investment bombed in 1999. As you did, I just need to convince myself that equities is where my money has to be.
    • TCA
    • By TCA 21st Jul 13, 8:49 PM
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    TCA
    From an income producing angle I'd be interested if anyone else is taking a similar approach to JohnRo and holding a selection of investment trusts for this purpose? If so, care to divulge the trusts, your reasoning and whether it's working?

    I linked The Motley Fool website earlier where poster Luniversal operates a basket of 7 trusts:

    " The B7 houses trusts from the UK Growth & Income, UK Growth, Global Growth & Income and Global Growth sectors. They are to be bought in equal amounts from a lump sum of 10,000 or more: Bankers (BNKR), F&C Capital and Income (FCI), JPMorgan Claverhouse (JCH), Lowland Investment (LWI), Mercantile (MRC), Murray International (MYI) and Perpetual Income & Growth (PLI)."

    Makes for very interesting reading.

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

    BLB53 linked the DIY Investors version which is City of London, Murray Income, Temple Bar, Edinburgh, Murray International, Bankers, Law Debenture, Henderson Far East, Schroder Oriental, B/Rock N. American, Aberforth Smaller Cos, and New City High Yield

    Anybody else?
    Last edited by TCA; 21-07-2013 at 9:07 PM.
    • JohnRo
    • By JohnRo 22nd Jul 13, 12:43 AM
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    JohnRo
    Thank you for the input Ark, and others too. Valuable and much appreciated.

    I'll be monitoring infrastructure/property IT's over the next weeks.

    Will probably post periodic updates from time to time to show how things are going. Intended doing the same with my other index tracking thread but moved platform in April and took the opportunity to switch to Blackrock D trackers which mixed things up a bit. Once it looks like I want it to (weeding out the managed smaller cos.) i'll update it.

    Future updates are for my own reference really but others may find it mildly entertaining and comments are always welcome.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 22nd Jul 13, 2:34 PM
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    TCA
    Depending upon how much rain we get this week, and when we get it (i.e. how little will I be able to do outside...), I'll put together a list of my own, but I'll put it into a separate thread so as to leave this thread for JohnRo's purpose.
    Originally posted by Ark Welder
    Thanks, that would be of interest (weather permitting!). Not my attention to derail JohnRo's thread.

    Will probably post periodic updates from time to time to show how things are going. Intended doing the same with my other index tracking thread but moved platform in April and took the opportunity to switch to Blackrock D trackers which mixed things up a bit. Once it looks like I want it to (weeding out the managed smaller cos.) I'll update it.
    Originally posted by JohnRo
    Will look forward to see how things progress. On the subject of managed smaller cos funds, I got an email reply from Best Invest on the non-tradable Aberdeen funds and will post it in the other thread.
    • JohnRo
    • By JohnRo 22nd Jul 13, 2:54 PM
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    JohnRo
    Purchases went through this morning, buckle up time for me now, expecting short term pullbacks but definitely comfortable with equities as a longer term investment.

    I take data snapshots on the first day of each month. Thanks for updating on EM smaller cos.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • gterr
    • By gterr 24th Jul 13, 3:47 PM
    • 552 Posts
    • 223 Thanks
    gterr

    Will probably post periodic updates from time to time to show how things are going. Intended doing the same with my other index tracking thread but moved platform in April and took the opportunity to switch to Blackrock D trackers which mixed things up a bit. Once it looks like I want it to (weeding out the managed smaller cos.) i'll update it.
    Originally posted by JohnRo
    Hi JohnRo,
    I'd be interested in reading your index tracking thread. Do you have a link to it?
    Thanks.
    • JohnRo
    • By JohnRo 24th Jul 13, 9:05 PM
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    JohnRo
    http://forums.moneysavingexpert.com/showthread.php?t=4186651

    Front page bears little relation to the actual tracker investments currently. Needs updating really but decided to stop tinkering with the first post and leave it alone for continuity.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
  • CWatters
    I don't think anyone in this thread has mentioned the risk of rising interest rates? Many income funds have a lot in bonds and fixed interest investments. Commentators are suggesting that if interest rates rise these funds could see a significant reduction in capital values. There is talk of a great rotation out of bonds into equities. Some articles suggest ways to minimise this risk by investing in bonds that have a high yield or are short dated, also funds that hold a large percentage of high dividend equities, or "strategic" bond funds that have a mandate that allows them to switch out of bonds.

    So with this risk in mind what do people think about these funds..


    Invesco Perpetual Distribution Fund (4.9% dist yield, monthly, Equities and various fixed int)
    Invesco Perpetual Global Financial Capital (6.6%, mostly corporate bonds from banks and other financial companies?)
    Invesco Perpetual Monthly Income Plus (5.7%, monthly, bias to Corporate bonds)
    Marlborough Multi Cap Income (4.3%, twice a year, UK Equities)
    Premier Multi-Asset Monthly Income (4.4%, monthly, fund of funds)
    Last edited by CWatters; 25-07-2013 at 1:15 PM.
    • TCA
    • By TCA 29th Jul 13, 9:36 PM
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    TCA
    JohnRo, what's your thinking in the switch from Best Invest to Charles Stanley? Obviously for the clean classes of fund and (RDR compliant?) pricing but anything else?

    I'm looking at probably a similar size of investment trust purchase to you and costwise it would be better for me to continue with Best Invest under their current pricing. Have you heard anything about whether it's likely to change?
    • JohnRo
    • By JohnRo 29th Jul 13, 10:55 PM
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    JohnRo
    Not heard anything about any price changes, I just made the decision I liked CS customer service and the web portal so much that I can live with them being a tad more expensive. I am holding out the hope they may drop their price tag on share dealing transactions in future though.

    I have an Iweb account and that would have been cheaper still but I'm just suited to Charles Stanley's web presentation and their interface for some reason. The web portal is new and they're still developing features, it must be the nerd in me but I really like the interactive style of it all. I know it's a few quid dearer for stock purchases but worth it for me and I'm trying to consolidate everything on there because it feels like I've got stuff spread all over the place at the moment and it's purgatory keeping track of it all.

    As you can see in the account statement image the transaction charges and tax do sting a little but I'm not sweating a few hundred right at the start, it'll be a few months before I can get any sense of what's doing well.



    Going to be clearing out what's left of my TD direct holdings this week and repurchasing on CS, one big advantage of UT funds I find is the lack of transaction costs.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • TCA
    • By TCA 29th Jul 13, 11:59 PM
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    TCA
    Thanks John. CS certainly looks pretty swanky. Have to agree far better than Best Invest's efforts and can't blame you for wanting all your stuff in one place. I'm of the same mind. Although all that extra info and functionality might lead to me dabbling too much and actually believing I know something about this investing malarkey. Dangerous!
    • JohnRo
    • By JohnRo 30th Jul 13, 9:12 AM
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    JohnRo
    "The best investment advice I ever got came when I was a runner for a brokerage firm when I was in college. One of the other runners said: !!!8220;Nobody knows nothing.!!!8221; And of course that!!!8217;s true. It!!!8217;s not given to us to know. The future is not ours to see. You try to make intelligent decisions, have an intelligent plan that balances risk and reward, balances stocks and bonds, and ignore the noise in the market."

    John C. Bogle
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 31st Jul 13, 2:35 PM
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    JohnRo
    May prove useful for those interested.

    http://citywire.ceros.com/itinsider/moneyaug2013/page/1
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 12th Sep 13, 11:39 AM
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    JohnRo
    Update for those interested, just under a couple of months invested and the dividends have started to kick in. Whether they meet expectations remains to be seen.

    The only real surprise here for me is NAIT, they changed the remit of the trust to non-tracking shortly before I purchased but the drop was quite sudden and sustained so not entirely sure what that's about, it coincided with a bit of a cooling off in the US but doesn't really tally with the s&p 500, more so with the DJ. I'm not losing any sleep over it though.



    this is the plot I've cobbled together, hopefully over time it'll start to look a little more informative.

    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 14th Sep 13, 11:38 PM
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    JohnRo
    There has been a move in the USA towards more growth-oriented companies at the expense of defensives, i.e. lower yielders favoured over higher yielders. Can't say 100% that this has caused all NAIT's performance, but is likely to have contributed, due to its investment remit.

    Defensives might come back into favour soon: another round of US budget and debt limits are approaching; German elections will soon be out of the way, which could make for interesting times again in the eurozone.

    Remember that it is the income that you're after, so you should try to concentrate on this and be prepared to accept that your chosen investment method will fall out of favour at times - just as it will fall back into favour at other times. If total return was your requirement then it might be a different story. Be wary of trying to introduce attempts at timing into your strategy unless you have specific reasons to believe that another investment approach might deliver a superior outcome.
    Originally posted by Ark Welder
    Oh I am. Not exactly a veteran but I've been around investment for quite a few years now and learned not to start chewing my nails every time something slides back a little.

    The dilemma really is whether to top up now or wait and see if there's a little further for the Asian and US income trusts to drop. Might be a good opportunity to push some of the cash pool towards helping to provide a solid 150 a month, assuming quoted/expected yields are similar in reality. The Asian income is one that had my trigger finger hovering over the buy button, recent lift made me wait and see though.

    I'm totally focused on the income of this fund, more or less expected the very slight overall drop in capital I've seen and pleasantly surprised with a couple of the trusts. This is planned as a hold forever proposition so it's definitely all about the income.

    The thing I will be interested to see is how the two Invesco monthly income funds duke it out with each other and also whether my very first thought to just pile the lot into IP distribution would have been a better option in the long run, only time will tell but it's all good regardless.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
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