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Portfolio status in green and dividends!

Sophisticated and complex high-risk tax-sensitive investments in small companies: handle with care
Artistxman
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Portfolio status in green and dividends!

#426341

Postby Artistxman » July 10th, 2021, 9:02 am

Hi all

I have been accumulating VCTs over the last 4 years based on some valuable posts from experts in this forum. They are diversified in the below VCTs:

investment (sub)


Octopus Titan VCT 2019/20
Octopus Titan VCT 2017/18
Octopus Titan VCT 2020/21
Octopus Titan VCT 2018/19


Amati AIM VCT 2020/21

Albion VCTs 2019/20
Albion VCTs 2020/21

Baronsmead VCTs 2018/19
Baronsmead VCTs 2017/18
Baronsmead VCTs 2020/21

British Smaller Companies VCTs 2020/21
British Smaller Companies VCTs 2018/19

Hargreave Hale AIM VCT 2021/22
Hargreave Hale AIM VCT 2020/21

Northern VCTs 2019/20
Northern VCTs 2018/19
Northern VCTs 2017/18

Maven Income & Growth VCTs 2019/20
Maven Income & Growth VCTs 2020/21
Maven Income & Growth VCTs 2021/22
Maven Income & Growth VCTs 2020/21

Mobeus VCTs 2019/20

ProVen VCT"

The overall return is +3.12%(as per the current valuation assessment by my platform provider Wealth club) and I have also received dividends from all of them(usually 4-5%) over the last 4 years and the tax benefit. So, it appears not a bad return considering the returns for cash. I know quite a few of the old hands are not investing actively. This is not bad in my view after allotting money in ISA and Pension...as an investment strategy. Am I missing something? Is the valuation still theoretical and so when I have to sell them at the 5 year mark...will the value be almost down 30% down and so all the benefit seen in tax return is just neutral? Just pondering.

Thanks for the advice as always!

UncleEbenezer
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Re: Portfolio status in green and dividends!

#426464

Postby UncleEbenezer » July 10th, 2021, 2:56 pm

A rising tide - of government money-printing - lifts all boats, VCTs included.

The question is not whether they're better than holding cash, but whether they're better than other investment classes. Your risk, your return, and the issue of putting your money to good use. That will depend a lot on your tax situation: they're rarely a great option without the tax breaks. Several Fools, myself included, bought a lot more at times in the past for reasons including much higher taxable incomes than today.

Some Fools are taking a cautious view since rule changes a few years back prohibited some gravy-train investments - principally MBOs - that had essentially de-risked the majority of mainstream VCTs. This is, to my mind, the strongest reason for caution. That gravy-train generated dividends that paid my entire rent, and with something to spare, from 2013 to 2019, and from an investment of half what the house would've cost me.

Another consideration that bothers some Fools is the flood of money going in: more money chasing whatever the pool of good investments may be. But that's true of any other investment class: it's easier to make £100k in the post-2009 wall-of-money than it was to make £1k in the 1980s. It's just one aspect of the devaluation of money.

Can you expect to sell without too much trouble? I sold about 30% of my portfolio in 2019 raising funds towards a house purchase. Most were fine, but (surprisingly) Baronsmead wasn't: I could only sell 5000 shares.

Artistxman
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Re: Portfolio status in green and dividends!

#426924

Postby Artistxman » July 12th, 2021, 9:43 am

Thank you for the insights...I agree with out the tax break it won't make any sense at all as an investment class. I will post my experience in selling in the coming years as I will be recycling them back into VCTs.

127tolmers
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Re: Portfolio status in green and dividends!

#427235

Postby 127tolmers » July 13th, 2021, 5:42 am

I think your portfolio bears out the unspoken secret of VCTs. With a good spread of quality generalist funds (excluding AIM as that has different drivers) you can expect bond like returns and relatively small capital growth and a low beta vs FTSE.

To give you an incentive to lock your money up for 5 years and to invest in individual small risky companies the government has to give you 30% tax relief up front and tax free dividends and capital gains. The only free lunch in Finance, namely diversification, significantly reduces your risk.

If you want something more racy then EIS companies may be more interesting. However the exit timeframe may be longer and, as primarily unquoted, not at a time of your choosing. You will not benefit from the governance and oversight of a VCT board.

A recent example of a quoted EIS was Sareum now a 10 bagger in under 2 years for those with strong nerves to ride the journey and still not at the tax free 3 year exit point.

Artistxman
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Re: Portfolio status in green and dividends!

#427330

Postby Artistxman » July 13th, 2021, 11:12 am

Thank you, A great point about diversification and well said. I learnt my lesson in diversification in my early days of ISA going all in just before 2008 crash into RBS and still have it in my ISA as a reminder! :cry: I was tempted by EIS and may be in a few years time once I am prepared to lose capital(as you say the capital is probably at risk more than VCT). Thanks as always this board helped me all the way from my ISA days in 2006 when it used to be hosted under the motley fool.


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