High Yield "migration", when and how (or if)

General discussions about equity high-yield income strategies
DiamondEcho
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Re: High Yield "migration", when and how (or if)

Postby DiamondEcho » November 17th, 2016, 4:43 pm

Stonge wrote:DiamondEcho: Do you mean Target Funds?


I was trying to not post a link as I'm not suggesting the specific provider, just the industry-wide practise behind it.
But here is an outline of how the Vanguard Lifestrategy funds vary according to age -> https://investor.vanguard.com/mutual-fu ... trategy/#/
That's just a stepped segue from potential growth towards locking in gains/income [de-risking].

Looking at your suggestion Target Funds, yes I think that might be even closer to what I had in mind [and clearer for it, in how they're structured how they are], so thanks for flagging them -> https://investor.vanguard.com/mutual-fu ... irement/#/

As one section of the above-linked shows, a product mix vs age chart ->
Vanguard Target Retirement Fund asset allocation tool. Move the slider to see the fund's asset allocation become more conservative as you approach retirement.


[To be clear: I never worked for Fidelity, but I certainly respect them, and personally would short-list them to invest via. I worked for one of the more er... aggressive/big operators, on the internal control side of things, so have seen the stuff the salesmen get up to. As a Fool, no, not even with a barge-pole...]

MrDoppleGanger
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Re: High Yield "migration", when and how (or if)

Postby MrDoppleGanger » November 17th, 2016, 5:08 pm

tieresias wrote:
BrummieDave wrote:Tieresias, aside from the fact that one is overseas in focus and one is UK in focus, I notice you categorise Portfolio 1 as 'HYPish' and Portfolio 3 as 'Equity Income'. Can I ask if you see a difference in their objectives and thus one is HYPish whilst the other is Equity Income, or is the difference in the naming you use simply down to the general naming convention for the ITs in Portfolio 3 and your own (perhaps TMF even) naming convention for portfolio 1?

Can an 'Equity Income IT' equally be considered to be an 'HYP IT' (and should I put my tin hat on before asking such a question)?


Portfolio 1 should be re-named as "Foreign Equity Income ITs".

At the time, my thinking was that the first portfolio sought income, but from outside the UK, and so supplemented my UK-focussed HYP and the second income sought growth without regard to income.

I offer no answer to your final question :)


hi tieresias, thanks for the portfolio list - very interesting.

Could you give me a rough and ready relative size of the relative portfolios and HYP.

TIA
MrDG

MDW1954
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Re: High Yield "migration", when and how (or if)

Postby MDW1954 » November 18th, 2016, 10:54 am

There is a useful table of income-centric investment trusts maintained on Monevator.

It includes (by design) every IT in Luni's baskets, plus others.

http://monevator.com/investment-trusts- ... 16-update/

MDW1954

Raptor
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Re: High Yield "migration", when and how (or if)

Postby Raptor » November 18th, 2016, 2:15 pm

MDW1954 wrote:There is a useful table of income-centric investment trusts maintained on Monevator.

It includes (by design) every IT in Luni's baskets, plus others.

http://monevator.com/investment-trusts- ... 16-update/

MDW1954


Good link. All 5 of my IT's are there. Will re-visit next time I am looking to diversify a bit more, AAIF looks good on that list as does CTY.

Raptor.

DiamondEcho
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Re: High Yield "migration", when and how (or if)

Postby DiamondEcho » November 18th, 2016, 3:04 pm

Thanks also at MDW, I've yet to read beyond the intro but it seems 'intelligently written' with a familiar [to Fools] approach re: proven performance and low fees etc, and I look forward to reading it later.

MDW1954
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Re: High Yield "migration", when and how (or if)

Postby MDW1954 » November 18th, 2016, 9:31 pm

I'm a bit conflicted here (about which I hope to say more soon), but let's say that the Foolish style is not exactly accidental.

MDW1954

kempiejon
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Re: High Yield "migration", when and how (or if)

Postby kempiejon » November 19th, 2016, 8:15 am

I've read the Greybeard's posts over the past year or so. I wasn't aware it wasn't out.

tieresias
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Re: High Yield "migration", when and how (or if)

Postby tieresias » November 19th, 2016, 12:32 pm

MrDoppleGanger wrote:hi tieresias, thanks for the portfolio list - very interesting.

Could you give me a rough and ready relative size of the relative portfolios and HYP.

TIA
MrDG


Sure. I update my records quarterly. As of 30th September 2016, the split in capital values between my various securities portfolios was:

Bond funds: 23%
HYP: 27%
Foreign Equity Income ITs: 19%
UK Equity Income ITs: 18%
ETFs: 3%

Growth ITs: 10%

That was the "rough and ready answer". More details below...

The bond funds, which I didn't mention in my post of 14/11, are accumulating units inside an ISA. I am currently non-resident, so unable to add, but in any case the portfolio has the reached the absolute value that I want.

The HYP, of 30 shares in 21 sectors, has also reached the absolute value that I want, so I am reinvesting dividends but adding no new money.

I am adding new money to the Foreign and UK Equity Income ITs and to the ETF (also not mentioned on 14/11; more below) portfolios, as well as reinvesting dividends alongside the new money. The new money is coming from a mixture of cash savings and salary. I expect the first two portfolios to be complete by year end and ETFs by early 2017.

The first five portfolios comprise my "Income Pot", to supplement a deferred DB pension. The reason that I am using cash savings to boost it is not that I am trying to time the market but rather that I am expecting to lose my job very soon and hope not to need another. So, I want the Income Pot fully operational asap to minimise dividend drag effects.

My target allocations within the Income Pot are that bonds and the two equity income portfolios will be of equal size; HYP (highest natural yield) will be 30% bigger and ETFs (lowest natural yield) 30% lower. Once everything is switched into distributing mode, I am expecting an overall yield of 4%.

For the time being, I am adding nothing to Growth ITs. Their job is to provide me with money to spend on fun stuff 5-10 years in the future, my so-called "Splurge Pot". This portfolio is held with the same broker as Foreign Equity Income ITs, so any dividends it produces are re-invested in the latter.

ETF Portfolio:
- SPDR S&P Global Dividend Aristocrats UCITS ETF (GBDV.L)
- iShares Core FTSE 100 UCITS ETF (Dist) (ISF.L)
- iShares FTSE 250 UCITS ETF (MIDD.L)
- Vanguard FTSE All-World UCITS ETF (VWRL.L)

This is a recently created portfolio, with anticipated yield of 3%, held with a separate broker. Whilst the other three equity components of the Income Pot are focussed on High Yield, I thought it would be sensible to allocate some money to an average yield total return portfolio, again split between the UK and the rest of the world.

Paul

taken2often
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Re: High Yield "migration", when and how (or if)

Postby taken2often » December 4th, 2016, 10:39 pm

I have listed on a spread sheet all my accounts and stockbrokers. I have regular conversations with my Executor

I have carried out an IHT trial and have the seven years records in place. The oldest to be replaced by the newest each year.

I record all my expenditure, daily monthly annual, plus gifts etc

I have a Power of Attorney and Welfair provision Registered.

Advanced Decision lodged with my Doctor.

And I have been recently reading up on Self Deliverance. Should Dementia threaten.

Be prepared as we old scouts used to say.

Bob

Raptor
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Re: High Yield "migration", when and how (or if)

Postby Raptor » December 5th, 2016, 8:48 am

taken2often wrote:I have listed on a spread sheet all my accounts and stockbrokers. I have regular conversations with my Executor

I have carried out an IHT trial and have the seven years records in place. The oldest to be replaced by the newest each year.

I record all my expenditure, daily monthly annual, plus gifts etc

I have a Power of Attorney and Welfair provision Registered.

Advanced Decision lodged with my Doctor.

And I have been recently reading up on Self Deliverance. Should Dementia threaten.

Be prepared as we old scouts used to say.

Bob


I write a letter to my daughter (to be opened if I go ga-ga or die) with a list of everything, all accounts, shares etc held at that time, bank accounts, savings accounts, utility providers etc. I have also made her aware of "gifts" that she needs to keep an eye on, for instance I have paid for some non-covered surgical procedure for family this year. All of this as I went though probate for my mum and my sister "lost" the original will, she had early stage dementia and I had LPOA on her finance, so had a good idea about everything.

Now I am training to be a "befriender" and so far what I have seen makes me more concerned about this than I would normally be.

Raptor.

sackofspuds
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Re: High Yield "migration", when and how (or if)

Postby sackofspuds » January 5th, 2017, 11:23 pm

grimer wrote:A school friend of my father's has experienced the financial problems caused by Alzheimer's. Her husband used to be a bank manager and had quite a bit of cash squirrelled away. Unbeknown to her, he had given their sons credit cards. Apparently, they spent far too much, but he kept paying the bills and they blew through most of the money.


Just thought I'd say thanks for sharing that cautionary tale. Flabbergasting.

Lootman
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Re: High Yield "migration", when and how (or if)

Postby Lootman » January 5th, 2017, 11:35 pm

grimer wrote:A school friend of my father's has experienced the financial problems caused by Alzheimer's. Her husband used to be a bank manager and had quite a bit of cash squirrelled away. Unbeknown to her, he had given their sons credit cards. Apparently, they spent far too much, but he kept paying the bills and they blew through most of the money. He's still alive, but 'not there' and they're now living on OAP pensions - It appears there isn't an occupational pension, but I'm not sure why or if that was somehow cashed in.

Things were financially very hard for the lady in question and she's been struggling to make ends meet. Recently she discovered that there was more money in a savings account she hadn't been aware of. When she took control, it transpired that one of the sons had known about it and was helping himself to cash - to the tune of £25k.


It could be even worse. Should the father die within seven years of this all happening, it's possible that HMRC might take the view that the paying of the sons' credit card bills, and perhaps even them "helping themselves" to the savings account, might be construed as gifts.

And that leads to the possibility that inheritance tax might be deemed due on those transfers even if his estate has little value left.

grimer
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Re: High Yield "migration", when and how (or if)

Postby grimer » January 7th, 2017, 2:22 pm

Lootman wrote:It could be even worse. Should the father die within seven years of this all happening, it's possible that HMRC might take the view that the paying of the sons' credit card bills, and perhaps even them "helping themselves" to the savings account, might be construed as gifts.

And that leads to the possibility that inheritance tax might be deemed due on those transfers even if his estate has little value left.


Wouldn't the estate transfer to the wife IHT free? I would have thought that the 'gift' would be perceived as a joint payment from both parents?

Lootman
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Re: High Yield "migration", when and how (or if)

Postby Lootman » January 7th, 2017, 3:07 pm

grimer wrote:
Lootman wrote:It could be even worse. Should the father die within seven years of this all happening, it's possible that HMRC might take the view that the paying of the sons' credit card bills, and perhaps even them "helping themselves" to the savings account, might be construed as gifts.

And that leads to the possibility that inheritance tax might be deemed due on those transfers even if his estate has little value left.

Wouldn't the estate transfer to the wife IHT free? I would have thought that the 'gift' would be perceived as a joint payment from both parents?

You didn't mention a joint account before, and indicated (to me anyway) that the father had made these gifts personally, with the wife perhaps not even knowing. Same with the savings account.

So it depends on the numbers. His gifts were not to his wife so would be subject to IHT if he died within 7 years and if they exceeded 325K. While any other gifts or bequests to his wife would be exempt regardless of amount, as you say.

grimer
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Re: High Yield "migration", when and how (or if)

Postby grimer » January 7th, 2017, 5:39 pm

Lootman wrote:You didn't mention a joint account before, and indicated (to me anyway) that the father had made these gifts personally, with the wife perhaps not even knowing. Same with the savings account.


I didn't realise the gifts would have to come from a joint account. I assumed that the taxman would view a married couple as having joint finances with regards to any gifts given to children.

Would the children be liable for the tax bill? If so, it could be poetic justice. If not, then it just compounds the wife's suffering.

Lootman
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Re: High Yield "migration", when and how (or if)

Postby Lootman » January 7th, 2017, 9:39 pm

grimer wrote:I didn't realise the gifts would have to come from a joint account. I assumed that the taxman would view a married couple as having joint finances with regards to any gifts given to children.

Although transfers between spouses are not usually regarded as tax events, if both spouses have separate accounts and monies, then it's possible for either one of them to give individual gifts, as well as joint gifts.

grimer wrote:Would the children be liable for the tax bill? If so, it could be poetic justice. If not, then it just compounds the wife's suffering

As I understand it, the circumstance in which HMRC might go after the children for tax is where

1) the donor dies within 7 years of making the gifts, and
2) the value of the estate plus those gifts means that IHT is due, and
3) the estate doesn't have enough funds to pay the IHT, and
4) the gifts totalled more than 325K.

Gengulphus
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Re: High Yield "migration", when and how (or if)

Postby Gengulphus » January 9th, 2017, 4:10 pm

Lootman wrote:As I understand it, the circumstance in which HMRC might go after the children for tax is where

1) the donor dies within 7 years of making the gifts, and
2) the value of the estate plus those gifts means that IHT is due, and
3) the estate doesn't have enough funds to pay the IHT, and
4) the gifts totalled more than 325K.

Not quite - HMRC will primarily go after the children (or more generally the gift recipients) for the IHT on the gifts if conditions 1, 2 and 4 are true, i.e. there's no need for condition 3. If they cannot collect from the gift recipients, then condition 3 becomes relevant to whether they can collect from the estate - but the order is definitely gift recipients first, estate second if IHT is due on the gifts, i.e. if condition 4 holds.

By the way, I suspect that in these days of transferrable IHT allowances, "325K" in condition 4 should be "the relevant amount of IHT allowance", but I haven't investigated the interactions of the laws concerned enough to know for certain.

Also, if conditions 1, 2 and 3 hold, but not 4, then all the IHT is primarily due from the estate, but HMRC cannot collect it all from the estate. In those circumstances, they can definitely go after others in some circumstances - e.g. if all or most of the assets that the IHT is liable on were held in joint accounts, they can collect from the surviving owners of those accounts. Whether those HMRC can collect from in such circumstances ever include the recipients of gifts, I'm not certain...

Gengulphus

Lootman
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Re: High Yield "migration", when and how (or if)

Postby Lootman » January 9th, 2017, 6:01 pm

Gengulphus wrote:Not quite - HMRC will primarily go after the children (or more generally the gift recipients) for the IHT on the gifts if conditions 1, 2 and 4 are true, i.e. there's no need for condition 3. If they cannot collect from the gift recipients, then condition 3 becomes relevant to whether they can collect from the estate - but the order is definitely gift recipients first, estate second if IHT is due on the gifts, i.e. if condition 4 holds.

Yes, I suppose that must be right, because otherwise the residual beneficiaries would effectively be paying the tax and not the gift recipients, which wouldn't be very fair. However I do wonder how much effort HMRC go to in order to collect from the gift recipients because, as a practical matter, that may fail a good amount of the time. The recipients might not be located, or are broke, or live overseas etc. I imagine if it proves too difficult to collect then HMRC might just go to the estate anyway because it's easier.

Gengulphus wrote:By the way, I suspect that in these days of transferrable IHT allowances, "325K" in condition 4 should be "the relevant amount of IHT allowance", but I haven't investigated the interactions of the laws concerned enough to know for certain.

Yes, it could also be 500K, 650K or a million, and various numbers inbetween with phasing.

Gengulphus wrote:Also, if conditions 1, 2 and 3 hold, but not 4, then all the IHT is primarily due from the estate, but HMRC cannot collect it all from the estate. In those circumstances, they can definitely go after others in some circumstances - e.g. if all or most of the assets that the IHT is liable on were held in joint accounts, they can collect from the surviving owners of those accounts. Whether those HMRC can collect from in such circumstances ever include the recipients of gifts, I'm not certain...

I'm not certain either but either way, the problems I outlined earlier would still apply. It's harder for HMRC once they have to go beyond the captive funds in the estate, and they have to start chasing down individuals.

Gengulphus
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Re: High Yield "migration", when and how (or if)

Postby Gengulphus » January 9th, 2017, 7:28 pm

Lootman wrote:Yes, I suppose that must be right, because otherwise the residual beneficiaries would effectively be paying the tax and not the gift recipients, which wouldn't be very fair. ...

Well, fairness is in the eye of the beholder - but at least in my eye, it doesn't seem very much in evidence in the rules about IHT on gifts! E.g. if I give an amount equal to my IHT allowance to each of two recipients, on different dates, and then fail to survive the 7 years, then the way the rules work is that the gift recipient who first received their gift gets the full benefit of my IHT allowance and pays no IHT, while the other gift recipient and the estate / residuary beneficiaries are liable to IHT at full whack... I don't see much fairness in that!

I think the motivations behind the rules are instead ease of collection - so gift recipients get first use of the IHT allowance, since they're liable to be harder to track down and less likely to still have the money to collect, and earlier gift recipients take priority over later ones, both to keep the number of gift recipients who have to be collected from down and to maximise the chances that they're still around and have the money...

Gengulphus


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