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  • FIRST POST
    • JohnRo
    • By JohnRo 20th Jun 13, 1:38 PM
    • 2,665Posts
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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
    • 681 Posts
    • 441 Thanks
    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
    • 2,665 Posts
    • 2,486 Thanks
    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
    • 2,665 Posts
    • 2,486 Thanks
    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
    • 590 Posts
    • 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
    • 547 Posts
    • 266 Thanks
    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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    • 2,486 Thanks
    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
    • 4,726 Posts
    • 6,176 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
    • 681 Posts
    • 441 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
    • 2,665 Posts
    • 2,486 Thanks
    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
    • 60,130 Posts
    • 53,460 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.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • 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
    • 2,665 Posts
    • 2,486 Thanks
    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
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