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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 19
    • takesyourchances
    • By takesyourchances 14th Apr 18, 1:43 PM
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    takesyourchances
    Excellent updates John, enjoy these a lot and well done with it all. I am working more on my IT's and adding in some REIT as well at the moment. Great job look forward to the next one.
    • JohnRo
    • By JohnRo 16th Apr 18, 4:15 PM
    • 2,677 Posts
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    JohnRo
    Total Return
    Calculating the total return of a holding over time.

    I understand the total stock return is the appreciation in the price plus any dividends paid, divided by the original price of the stock.

    Using SOI as my example I have purchased, received dividends, sold at profit, repurchased, received more dividends and currently hold.

    How would you calculate SOI total return from this data?



    It's fairly obvious the net gain divided by the tax cost on each line gives the TR for that entry.
    I just then had a doubt whether the sale profit can be carried through to the subsequent repurchase soon after in this way and treated as one contiguous transaction chain, is the gain being properly accounted for in the TR figure or do I need to do some sort of rebasing calculation with the old cost and new cost?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 23rd Apr 18, 2:38 PM
    • 2,677 Posts
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    JohnRo
    I've cobbled a chart that plots the calculated total returns, this includes capital gain (also shown), dividends and any (not so) timely purchases and sales.

    It raises more questions than it answers imo..



    The most obvious thing this demonstrates is the dreaded diworsification process in action. I realise there will always be a winner and a loser where more than two investments are held, it does beg the question whether PGIT in this case is adding any value whatsoever though.

    The aggregate plot is quite close to the portfolio as a whole so these two examples are the bigger picture in a nutshell. I'm looking to gleen some sort of understanding from what this chart is showing, other than the obvious, that laggards are a drag on winners, which is always the case regardless.

    I suppose the conundrum now and going forward is whether the losers will keep being losers longer term and the winners remain on top.

    PGIT is pushing close to an 8% yield currently while MRC yields close to a quarter of that. I can't see how that matters much though when the TR is the proof of the investment pudding.

    Then again the income stream is increasingly feeding the rebalance schedule alongside new money in, so that has a part to play.

    I'll chalk it up as the cost of diversification and hope the next crash mixes things up a little, if not I might have to start reconsidering holdings like PGIT.

    Any thoughts?
    Last edited by JohnRo; 23-04-2018 at 2:43 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • fairleads
    • By fairleads 23rd Apr 18, 10:23 PM
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    • 158 Thanks
    fairleads
    Calculating the total return of a holding over time.
    How would you calculate SOI total return from this data?



    It's fairly obvious the net gain divided by the tax cost on each line gives the TR for that entry.
    I just then had a doubt whether the sale profit can be carried through to the subsequent repurchase soon after in this way and treated as one contiguous transaction chain, is the gain being properly accounted for in the TR figure or do I need to do some sort of rebasing calculation with the old cost and new cost?
    Originally posted by JohnRo
    JR maybe you need to factor in the cost and amount of units purchased against cost and amount of units sold + annual divi
    i.e. (weighted average cost of units disposed minus weighted average base cost of the units ) + div
    • capital0ne
    • By capital0ne 23rd Apr 18, 11:27 PM
    • 573 Posts
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    capital0ne
    This thread reminds me of the good old Derek and Clive dialogues!
    • JohnRo
    • By JohnRo 9th Aug 18, 1:08 PM
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    JohnRo
    DAY 1876 - (09/08/18) update for those interested.

    tl;dr - UKML ditched, more of the same.

    Not much has changed in the four months since last update, the antagonistic Trump trade wars and juvenile tweets rumble on, additional sanctions on Russia are in the pipeline and Iran is being promoted as the new focus of his 'do as I say, not as I do' road show.

    Despite this the portfolio valuation trajectory has changed markedly, not unlike the weather, as a rally from lows at last update continues, helped in no small part by strengthening USD and EUR versus GBP.



    UKML has gone, it's been a bit of a dog in the relatively short 2.5 years I've held it, very dissapointing overall with capital value falling almost 15% and a negative total return of -0.88% in that time.

    TFIF has also been trimmed temporarily as part of a phased shift from a GIA account into ISA. I may revisit the entire debt section of the portfolio at some point as all debt components are causing a relative drag which although entirely expected in rising markets, is being compounded by the uncertainty over RDL. I might instead look at ditching the entire debt section which is largely TR stagnant and instead adjust a strategic cash allocation outside this portfolio.



    In the mean time the rebalancing continues, I'm not being dictated to entirely by spreadsheet as there are some contentious overlaps and values regarding purchases around the once monthly schedule and relevant ex-dividend dates. It'll all more or less even out over the duration though.



    Trailing annual income continues it's choppy rise as new dividends are added to the front of the queue and the year old ones fall off the back. Current equivalent monthly average sits at 544.08 with an income target of 600 pcm in March of this tax year still looking achievable, the loss of UKML and a trimmed TFIF will be a setback though, so the timing will be tight.




    In terms of percentage returns many of the rebalancing opportunities have started to evaporate as the downturn at last update has reversed with the total return plot once again decidedly on the up, it seems the long anticipated crash will have to wait.. for now.




    Here are the scheduled purchases made since the last update in April.

    2018-05-02 438 HENDRSN F/EAST INC 3.73

    2018-06-01 2116 JPMRGN EPN INV INC 1.58

    2018-07-04 165 MURRAY INTL 11.33

    2018-08-01 1869 JPMN GLOB EMERG 1.26

    Hopefully the EM bias here and the timing proves useful longer term, only time will tell.

    The rising capital input and returns have helped to keep long term cost percentage reductions on track, annual average costs are still heading towards a number below 0.20% this year and should continue to fall away towards the intended trivial percentage value.

    One less than trivial value is the aggregate portfolio OCF, collated from individual KID documents and weighted accordingly to detail the overall internal charge. One or two of the holdings are lifting this number significantly so it's not particularly representative of the majority but still much higher than I would have liked or expected. That said, it is what it is.




    The long run projection has obviously lifted since last update and remains on course to deliver something approaching an 8-10% annualised total return, which if maintained long term won't win any prizes but is plently good enough for me.



    Here's the discrete annual performance chart, a chunky negative first quarter in CY 2018 has now gone positive two thirds of the year in thanks to the recent upturn.



    That's all folks, hope the image overload provides some interest, next update around December.

    'Derek and Clive'... over and out.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • ColdIron
    • By ColdIron 9th Aug 18, 1:17 PM
    • 4,925 Posts
    • 6,558 Thanks
    ColdIron
    I got another Return of Capital/Liquidation payment from LSLI in June, did you? The gift that keeps on giving apparently
    • JohnRo
    • By JohnRo 9th Aug 18, 1:26 PM
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    JohnRo
    Yes omitted to mention it, it's bitter sweet.

    I was very disappointed with the initial wind up / restructure but the subsequent liquidation payments have been a pleasant surpise.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • takesyourchances
    • By takesyourchances 9th Aug 18, 5:25 PM
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    • 500 Thanks
    takesyourchances
    Good to see your latest updates John, going well and reaching a great monthly income from your portfolio. Always read with interest thanks for sharing. I am working away on my IT's as well slowly but surely
    • JohnRo
    • By JohnRo 4th Sep 18, 2:42 PM
    • 2,677 Posts
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    JohnRo
    I've decided to ditch the Vanguard US listed ETFs, VNQ and VNQI, it's a real shame but they're effectively locked down by the new PRIIPs regulations and their lack of a KID, which means platforms cannot allow them to be purchased.

    I thought I'd found a fairly decent solution to the global property allocation in these two but as usual I've been overtaken by events and only seem to have succeeded in creating more problems. It doesn't look likely the issue is going to be resolved any time soon so perhaps it's better to fix it now rather than waiting for a change in their KID status that may never arrive.

    I've looked at a few global property funds in the past but opted for the US ETFs at that time, hindsight... One is HDRP, there is also IWDP as an option, but it's relatively pricey and has a slightly lower yield.

    Problem is the HSBC ETF which otherwise looks attractive mentions a 5% entry and exit charge in the KID, first glance I assumed this was the old 5% entry charge most platforms now discount but I'm not sure about that with the additional 5% exit charge as well, does anyone know if these charges are applied internally or platform options?

    I'm not prepared to take a 5% entry and 5% exit hit, no chance, despite having no intention of selling.

    IWDP explicitly states there are no one off entry and/or exit charges, which more than compensates for the higher 0.59% OCF and slightly lower 3.07% current yield, this makes it the most likely option now.

    Choices seem very limited in this area but if you had to choose (fishing for suggestions) one global property IT / ETF as a replacement for VNQ & VNQI what would you choose?
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • Thrugelmir
    • By Thrugelmir 4th Sep 18, 6:44 PM
    • 62,011 Posts
    • 55,203 Thanks
    Thrugelmir
    UKML has gone, it's been a bit of a dog in the relatively short 2.5 years I've held it, very dissapointing overall with capital value falling almost 15% and a negative total return of -0.88% in that time.
    Originally posted by JohnRo
    Seeing your post reignited my interest in the stock. Personally I exited a long time back when the managers were struggling to invest the proceeds from the launch.

    Seems to be trading at a discount of 13-15%. Perhaps time to buy back into the stock. Yield of 6% isn't bad either. For an alternative form of fixed interest holding.
    "You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets." - Peter Lynch
    • JohnRo
    • By JohnRo 4th Sep 18, 7:15 PM
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    JohnRo
    I did debate at some length whether to just sit on it and rebalance, ride out the dip.

    The yield is good, discount attractive, but it had got to the point over the period I held it that it was just returning lost capital. I may well have misjudged it, I know 2.5 years is too short a time to be drawing conclusions but it seemed to have a lot of promise that had stagnated, it hasn't even been particularly volatile which might have helped sway me towards holding on and rebalancing, just a fairly steady decline so in that situation I'd just rather have cash earning some interest ready to be deployed.

    I've kept it on the watchlist so I'll see whether it was a mistake to bin it in time but don't think I'll be revisiting it.

    Still debating whether to ditch the debt allocation entirely and hold a larger cash pool, in an ideal world it would then be used to buy a market crash but I'm not at all convinced that's going to happen in the way I'd like to imagine.

    A lot will depend on how the RDL dispute pans out and what sort of damage if any it does to the valuation.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 5th Sep 18, 10:01 AM
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    JohnRo
    Seems to be trading at a discount of 13-15%.
    Originally posted by Thrugelmir
    I took this at face value but having looked briefly I can't see that there is one?

    It appears to be trading at a slight premium to NAV and the SP has been consistently tracking the NAV lower as the outstanding loan book shrinks over time.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • JohnRo
    • By JohnRo 1st Jan 19, 3:21 PM
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    JohnRo
    DAY 2021 - (01/01/19) update for those interested.

    tl;dr - Good riddance 2018. A tough year, bring on 2019...

    Trump continues to exploit divisive populist themes with his conflict driven agenda and juvenile tweets, aimed primarily at a rising China. He appears to become more erratic, unhinged and orange by the day.

    US and world markets don't seem to like it much, more uncertainty, in what appears to be an increasingly uncertain world.

    Trump's latest tantrum; pointing an accusing finger at the money printers in the FED. After seeking adoration for years of FED inflated QE share price and stock market gains as a direct result of his own populist agenda. Then squealing like a stuck pig when markets inevitably start heading in the wrong direction.
    If nothing else it provides an insight into the binary thought processes of a narcissistic demagogue leading the most powerful militaristic country on Earth.

    Could Trump be the catalyst that finally gets a long anticipated global stock market price crash underway, as QE continues to unravel? Who knows..

    One thing that is certain, this income portfolio's rolling monthly rebalance schedule will continue for better or worse, regardless.



    The rebalancing opportunities that disappeared briefly around last update in August have been well and truly reinstated in the recent off/on/off again rally and current downturn. Hopefully they stick around long enough for the scheduled monthly rebalancing to capture some heavily reduced prices and ideally, lower average costs into the bargain.



    Here are the scheduled purchases made to date since the last update in August.

    2018-09-03 242 VOLTA FINANCE 7.20 S Date 05/09/18

    2018-10-01 1313 ABEN LATI .62 S Date 03/10/18

    2018-11-05 235 EDINBURGH IT 6.50 S Date 07/11/18

    2018-12-14 264 INT BIOTECH 6.16 S Date 18/12/18

    There are still allocations requiring considerable adjustment but the next 6-12 months should see things becoming substantially aligned as target weightings get much closer to being balanced, notwithstanding market volatility.



    Uncertainty about the eventual net contribution or much more likely, the damage from RDL persists. I plan for now to keep the current debt allocation in the other debt trusts and adjust them accordingly when RDL eventually goes.



    Trailing annual income continues to progress as new capital is added alongside internal dividend reinvestment.
    The current monthly equivalent income based on the trailing annual average now sits at 608.93, well above the income target of 600 pcm predicted by end of March 2019 at last update, unfortuately as mentioned above this has only been achieved at the expense of RDL capital, as that trust winds down with a series of substantial dividend payouts.

    Another chunky RDL special dividend due in January 2019 will see the monthly income number peak higher and then begin to subside as the short term income boost provided by these large RDL dividend payouts declines over the longer term. How quickly and to what extent that monthly equivalent number then pulls back will be interesting to see as income from new capital and dividends rolls in to offset the post RDL reversion.

    Capital input has not managed to offset significant capital losses in recent weeks and the planned reductions to the various ongoing cost percentages have suffered as a result of the sharp downturn in December.



    Alongside a spike in the relative cost percentages the long run projections have also suffered, as have rolling return and Unit Price metrics.







    Not surprisingly the discrete annual performance chart is now firmly into negative territory with 2018 easily the worst CY in capital performance terms since this portfolio began in mid 2013. Hopefully it stays that way going forward.



    That's all folks, apologies for any errors, things are still a little hazy. Hope everyone had a good Christmas and here's hoping 2019 brings a little more to cheer for investors than 2018 did. Next update around mid 2019.

    ..HNY, over and out.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • green_man
    • By green_man 1st Jan 19, 7:29 PM
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    green_man
    Good info John, and yes some of us are still interested :-)

    I also had RDL but got shut after the first of the special dividends and before it delisted. I ended up losing 11% on capital but over the 18 months or so I had it took about 25% in dividends so a pretty successful punt, but it’s absence will affect my ongoing income somewhat.
    • takesyourchances
    • By takesyourchances 1st Jan 19, 9:23 PM
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    • 500 Thanks
    takesyourchances
    Happy New Year John, enjoyed your update as always. It has been a bumpy lot of weeks, think keep the head down and keep at things. Hopefully 2019 is a better year than this year. I am plugging away too at my IT's and always enjoy reading.



    Best wishes for this year.
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