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  • FIRST POST
    • john4586
    • By john4586 11th Jul 18, 11:25 AM
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    john4586
    Is this true; re Dividend vs Capital growth?
    • #1
    • 11th Jul 18, 11:25 AM
    Is this true; re Dividend vs Capital growth? 11th Jul 18 at 11:25 AM
    A friend this weekend informed me he had 200k invested with Hargreaves Hale, where his capital was 100% protected and had a guaranteed (?) dividend every year of 700 per month.

    I have a similar amount of capital after inheriting following the death of my mother.

    I have used 40k in ISA stocks and shares, and the rest looking to invest in a similar way, with funds mainly picked from Hargreaves Lansdown, and Fidelity.
    We are both retired and his reasoning is, better to take a dividend every year particularly if your capital is protected.
    Would value any input regarding this scenario.
Page 1
    • Malthusian
    • By Malthusian 11th Jul 18, 11:36 AM
    • 4,636 Posts
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    Malthusian
    • #2
    • 11th Jul 18, 11:36 AM
    • #2
    • 11th Jul 18, 11:36 AM
    A friend this weekend informed me he had 200k invested with Hargreaves Hale, where his capital was 100% protected and had a guaranteed (?) dividend every year of 700 per month.
    Originally posted by john4586
    One of those things is not true. "Guaranteed dividend" is in itself a contradiction. So is "guaranteed" and 4.2% a year in the current interest rate environment. You can get 4.2% guaranteed from an annuity, but Hargreaves Hale doesn't do annuities, so I doubt it's what your friend has. More information needed.

    What your friend may actually have is an investment portfolio with Hargreaves Hale (as that's what they do) from which he is withdrawing a fixed amount of 700 per month. If the portfolio grows by less than 4.2% in a year then he will be eating into the capital, and nothing is guaranteed. But I am making a guess based on limited information.

    If you want income of 4.2% a year then in general terms your options are to either buy an annuity (the trade-off is to lose flexibility and part or all of the capital on death) or to accept some investment risk.

    As you are not au fait with investments (there's nothing wrong with that, it's just what your post suggests) it would be worth taking independent financial advice from an IFA.
    • bostonerimus
    • By bostonerimus 11th Jul 18, 11:39 AM
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    bostonerimus
    • #3
    • 11th Jul 18, 11:39 AM
    • #3
    • 11th Jul 18, 11:39 AM
    The name and exact structure of this investment would be helpful....
    Misanthrope in search of similar for mutual loathing
    • john4586
    • By john4586 11th Jul 18, 11:50 AM
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    john4586
    • #4
    • 11th Jul 18, 11:50 AM
    • #4
    • 11th Jul 18, 11:50 AM
    Thanks for the replies. His investment is as you suggested a portfolio of mixed investments. I do not have any detailed information.
    My main point, was the comparison between what he has chosen, vs my choice of picking funds via a fund provider. Given the time frame for growth 7 years approx.
    • bostonerimus
    • By bostonerimus 11th Jul 18, 12:01 PM
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    bostonerimus
    • #5
    • 11th Jul 18, 12:01 PM
    • #5
    • 11th Jul 18, 12:01 PM
    Without knowing the funds there's no basis for comparison. The claim of a 4.2% guaranteed dividend sounds bogus to me. There are high dividend funds and also income funds that pay big dividends, but they come with lots of caveats rather than guarantees.
    Misanthrope in search of similar for mutual loathing
    • ColdIron
    • By ColdIron 11th Jul 18, 12:07 PM
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    ColdIron
    • #6
    • 11th Jul 18, 12:07 PM
    • #6
    • 11th Jul 18, 12:07 PM
    Hargreaves Hale, who are now Canaccord, are a wealth management company so it depends what sort of product he has bought into. It's unlikely these dividends are natural yield because of the lumpy nature of dividends. Monthly, quarterly biannually etc with some having Jan/April/July cycle and others a Feb/May/Aug one

    I have a SIPP in drawdown and choose to take 1,000 a month, This is made up of mostly natural yield (whatever dividends happen to be distributed that month) and a little cash. Next month it may be a little more cash and a little less the month after. It is guaranteed in as much as I am certain to be paid that much until I instruct my provider to change it. On top of this I am getting capital growth (or loss) as I am not selling down to provide income but this is not guaranteed

    There is something missing from what your friend has told you
    • AnotherJoe
    • By AnotherJoe 11th Jul 18, 12:28 PM
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    AnotherJoe
    • #7
    • 11th Jul 18, 12:28 PM
    • #7
    • 11th Jul 18, 12:28 PM
    A friend this weekend informed me he had 200k invested with Hargreaves Hale, where his capital was 100% protected and had a guaranteed (?) dividend every year of 700 per month.
    Originally posted by john4586
    There's a whole world of difference depending if your "?" is yes or no !


    I also do not believe that the capital is "100% protected" without there being a whole set of caveats and conditions attached making it most likely that it isn't in fact "100%" protected except under certain very specific conditions.


    But you'll have to post chapter and verse for anyone to make out teh exact situation.
    Last edited by AnotherJoe; 11-07-2018 at 12:31 PM.
    • firestone
    • By firestone 11th Jul 18, 12:42 PM
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    firestone
    • #8
    • 11th Jul 18, 12:42 PM
    • #8
    • 11th Jul 18, 12:42 PM
    It would be possible to get 700 a month in div's on that amount with some IT or funds.But as others have said its the word guaranteed that is the problem.I have seen it mentioned before as a plan for someone who has retired that some IT's (and funds) have paid a rising div over many years and could "almost" be guaranteed as a income you expect from a set amount of shares as you would not sell any shares at any time .But part of the plan is that you accept the risk of no growth or even loss with your lump sum but are almost willing to set that amount aside just for the income and not worry about growth as other investors would and hope you don't need it or may leave less to children etc so may not be suitable for many
    • dunstonh
    • By dunstonh 11th Jul 18, 2:15 PM
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    dunstonh
    • #9
    • 11th Jul 18, 2:15 PM
    • #9
    • 11th Jul 18, 2:15 PM
    What he describes to you does not exist. There is no guaranteed div and there is no capital guarantee.

    Its most likely that the 700pm is a fixed regular withdrawal (just like drawing 700 from your bank account each month). Probably taken from the cash account.

    The company is a DFM. So, it will be a portfolio of shares, probably quite expensive and probably not that good (I have yet to find a DFM that adds value for their cost).
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • john4586
    • By john4586 11th Jul 18, 2:40 PM
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    john4586
    Yes this was my thoughts at the time. I am not so aware of what is, and is not possible having just taken an interest in the financial markets.

    Always thought any kind of income derived from a "pot" of cash sitting in a portfolio would

    A. Be taxable
    B. Not add to the pot inhibiting any real growth.
    C. No guarantee the income will be consistent over any period of time.

    However,I will try to get more specifics as to the type of fund and the exact amount invested. ( If he is willing to tell me that is)
    • AnotherJoe
    • By AnotherJoe 13th Jul 18, 1:28 PM
    • 10,550 Posts
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    AnotherJoe
    "A" isnt necessarily true if its in a pension, and definitely isn't true if in an ISA.
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