Tracker fund yield - is higher better?
[Deleted User]
Posts: 0 Newbie
Hi
I've been researching tracker funds which include dividends. I appreciate the basic priciple behind yield, and the fact that higher means more dividend paid, but if this is the case then is higher always better? If not, why? I appreciate charges are a big factor with trackers, as well as risk appetite and diversification, but is yield just as important when making comparisons between funds even if it's being reinvested rather than used as income?
Thanks
I've been researching tracker funds which include dividends. I appreciate the basic priciple behind yield, and the fact that higher means more dividend paid, but if this is the case then is higher always better? If not, why? I appreciate charges are a big factor with trackers, as well as risk appetite and diversification, but is yield just as important when making comparisons between funds even if it's being reinvested rather than used as income?
Thanks
0
Comments
-
but if this is the case then is higher always better
No. Yield is just almost an irrelevance when it comes to choosing investments unless you are looking at taking natural income (the old fashioned way of income investing).If not, why?
Total return is what matters.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Reinvested dividends and capital gains are both important in as much as they combine to give the Total Return....as dunstonh says Total Return is the important metric to track for anyone wanting to grow a pension pot.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
-
So for example on the h&l website the charts and performance section and 'annual return' are the key figures then?0
-
No. Yield is just almost an irrelevance when it comes to choosing investments unless you are looking at taking natural income (the old fashioned way of income investing).0
-
I would have thought that natural income for people who want income must be the best way. No work, no fees, no worry. That's a comfortable retirement.
To have to sell small amounts every month/year gives work, fees, worry.0 -
As (almost) always in investing, I believe the choice between capital drawdown and natural income is best answered by "both". In my case a sizeable amount is taken as dividends and also an annual drawdown lump sum is taken sufficient to just keep within the current tax band. This is done as part of the annual review/rebalance and so involves little extra effort.
To answer the OP as to whether a high dividend is better than a low one: "better" should mean "most appropriate for your objectives". So it depends on your objectives. If you want income, a tracker fund is unlikely to be the best way of getting it. If you dont want income, dont chase it.
Fund performance reports are based on total return - income+capital growth. Yield determines the relative proportions.0 -
As (almost) always in investing, I believe the choice between capital drawdown and natural income is best answered by "both". In my case a sizeable amount is taken as dividends and also an annual drawdown lump sum is taken sufficient to just keep within the current tax band.0
-
Linton, interested to know if you take your annual drawdown sum from your growth/100% equities portfolio?
It is done as part of rebalancing so it could be either from the growth or wealth preservation portfolios which have funds in both our SIPPs and our S&S ISAs. Excess drawdown is reinvested in S&S ISAs, so again this provides opportunity for rebalancing between all 3 portfolios, growth, WP, and income.0 -
dunstonh, do you advise retired clients to leave their investments in growth funds and drawdown from capital gains rather choosing income funds and taking natural income? I thought a taking natural income might still be the preferred way as dividends would still keep coming in years when markets have crashed, rather than having to sell capital at a loss?0
-
I would have thought that natural income for people who want income must be the best way. No work, no fees, no worry. That's a comfortable retirement. To have to sell small amounts every month/year gives work, fees, worry.The implication of all this is that a natural yield approach is a bonkers retirement income strategy for virtually all but very wealthy retirees, who mostly rely on other sources of steady income.0
This discussion has been closed.
Categories
- All Categories
- 343.2K Banking & Borrowing
- 250.1K Reduce Debt & Boost Income
- 449.7K Spending & Discounts
- 235.3K Work, Benefits & Business
- 608K Mortgages, Homes & Bills
- 173.1K Life & Family
- 247.9K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.9K Discuss & Feedback
- 15.1K Coronavirus Support Boards