Funds for yield

[UnclePhilip]

Having just recently sold one of our last investment properties (leaving just one), I'm looking at rebalancing our investments. We're both retired, ordinary State pensions, unencumbered home, so investment income will continue to be important. Extra factor is my poor health, so our portfolio needs to be manageable for a widow uninterested and inexperienced in such matters.

Currently we have (excluding our home's value) about 65% of our net worth in equities and 35% in cash. The equities are about 60% in a Fisher Global fund, about 25% in a HYP, and about 15% in Vanguard global trackers.

Looking at the HYP, plus the cash on deposit, I'm wondering whether to go for a HYP in my usual way, or look at some income generating funds, of whatever sort. This is something I'm unfamiliar with, and would be grateful for some pointers.

Can anyone share information, advice on this, please?

Thanks....

[tjh290633]

You have three options that I can see.

Go for an Investment Trust which has a reasonable yield, which leads you to the B7 or B8 created by Luni.

Go for a fund, of which there are myriads. I hold two, M&G Dividend Fund with a yield of 4.95% and an IRR of 8.73%, and Threadneedle UK Equity Income, with a yield of 3.9% and an IRR of 7.72%. There are many more to look at. You can investigate ETFs is you wish.

Go for an HYP. You need to start from first principles, and I suggest that you go for at least 20 holdings, bearing in mind diversity.

TJH

[bluedonkey]

My instinctive reply is to say "leave Fisher"!

[stressor]

how much are you paying for Fisher Global fund in fees ?

[tjh290633]

You have three options that I can see.

Go for an Investment Trust which has a reasonable yield, which leads you to the B7 or B8 created by Luni.

Go for a fund, of which there are myriads. I hold two, M&G Dividend Fund with a yield of 4.95% and an IRR of 8.73%, and Threadneedle UK Equity Income, with a yield of 3.9% and an IRR of 7.72%. There are many more to look at. You can investigate ETFs is you wish.

Go for an HYP. You need to start from first principles, and I suggest that you go for at least 20 holdings, bearing in mind diversity.

TJH

My bold text. Finding 20 or more investable high yield companies could be a challenge right now? Certainly, I couldn't think of even half that number right now.

Have you tried looking? I have 35 holdings, 25 of which have yields high enough for selection now. I have none which I would dispose of, or which I feel concerned about.

What are your criteria of investability?

TJH

[UnclePhilip]

My instinctive reply is to say "leave Fisher"!

I find this puzzling. Our Fisher funds have, net of fees, outperformed the MSCI global benchmark for the couple of years since we invested.

That'll do me fine, not sure what goals you have....

[UnclePhilip]

how much are you paying for Fisher Global fund in fees ?

Haven't file to hand, but I think 2.25% initial fee then annual charge about 1.66%

But, as per my post just now, it's performance net of fees against the chosen benchmark that counts for me

[Alaric]

Haven't file to hand, but I think 2.25% initial fee then annual charge about 1.66%

Treating the FTSE 100 dividend yield at around 4.5% as a benchmark, that's a third of the dividend income gone in annual charges.

[UnclePhilip]

You have three options that I can see.

Go for an Investment Trust which has a reasonable yield, which leads you to the B7 or B8 created by Luni.

Go for a fund, of which there are myriads. I hold two, M&G Dividend Fund with a yield of 4.95% and an IRR of 8.73%, and Threadneedle UK Equity Income, with a yield of 3.9% and an IRR of 7.72%. There are many more to look at. You can investigate ETFs is you wish.

Go for an HYP. You need to start from first principles, and I suggest that you go for at least 20 holdings, bearing in mind diversity.

TJH

Thanks for this. Is there a funds comparison website you use?

And what's this IRR thingy?

[UnclePhilip]

Haven't file to hand, but I think 2.25% initial fee then annual charge about 1.66%

Treating the FTSE 100 dividend yield at around 4.5% as a benchmark, that's a third of the dividend income gone in annual charges.

Oh dear, I really meant to provoke a discussion of yield funds and HYP, not on Fisher investments.

I'll leave others to discuss Fisher, but would be very grateful for pointers relating to my original query....

[Alaric]

I'll leave others to discuss Fisher, but would be very grateful for pointers relating to my original query....

The point is not specifically about Fisher, but rather that if you are looking for dividend income, having it swiped by charges isn't helpful.

IRR stands for Internal Rate of Return. It's that value which if everything was in a deposit account, would be the rate of interest on the account to get from a starting value to an end value with dividend payouts on the way.

[kempiejon]

Having just recently sold one of our last investment properties (leaving just one), I'm looking at rebalancing our investments. We're both retired, ordinary State pensions, unencumbered home, so investment income will continue to be important. Extra factor is my poor health, so our portfolio needs to be manageable for a widow uninterested and inexperienced in such matters.

Currently we have (excluding our home's value) about 65% of our net worth in equities and 35% in cash. The equities are about 60% in a Fisher Global fund, about 25% in a HYP, and about 15% in Vanguard global trackers.

Looking at the HYP, plus the cash on deposit, I'm wondering whether to go for a HYP in my usual way, or look at some income generating funds, of whatever sort. This is something I'm unfamiliar with, and would be grateful for some pointers.

Can anyone share information, advice on this, please?

Thanks....

If the "manageable for a widow uninterested" is a big driver then why not more Vanguard global trackers? A FTSE100 ETF VUKE would yield about 4%, is that enough, it'd match some HYP holdings though weightings different? You could look at Europe ex UK VERX a bit under 3%.

[UnclePhilip]

Having just recently sold one of our last investment properties (leaving just one), I'm looking at rebalancing our investments. We're both retired, ordinary State pensions, unencumbered home, so investment income will continue to be important. Extra factor is my poor health, so our portfolio needs to be manageable for a widow uninterested and inexperienced in such matters.

Currently we have (excluding our home's value) about 65% of our net worth in equities and 35% in cash. The equities are about 60% in a Fisher Global fund, about 25% in a HYP, and about 15% in Vanguard global trackers.

Looking at the HYP, plus the cash on deposit, I'm wondering whether to go for a HYP in my usual way, or look at some income generating funds, of whatever sort. This is something I'm unfamiliar with, and would be grateful for some pointers.

Can anyone share information, advice on this, please?

Thanks....

If the "manageable for a widow uninterested" is a big driver then why not more Vanguard global trackers? A FTSE100 ETF VUKE would yield about 4%, is that enough, it'd match some HYP holdings though weightings different? You could look at Europe ex UK VERX a bit under 3%.

Thanks for this, I hadn't realised the spread of Vanguard funds. This one:

https://api.vanguard.com/rs/gre/gls/1.3 ... s/13536/gb

https://www.vanguardinvestor.co.uk/rs/g ... nts/929/gb

Yields over 5%. This seems almost suspiciously good.

Am I missing something here, do you think?

[tjh290633]

You have three options that I can see.

Go for an Investment Trust which has a reasonable yield, which leads you to the B7 or B8 created by Luni.

Go for a fund, of which there are myriads. I hold two, M&G Dividend Fund with a yield of 4.95% and an IRR of 8.73%, and Threadneedle UK Equity Income, with a yield of 3.9% and an IRR of 7.72%. There are many more to look at. You can investigate ETFs is you wish.

Go for an HYP. You need to start from first principles, and I suggest that you go for at least 20 holdings, bearing in mind diversity.

TJH

Thanks for this. Is there a funds comparison website you use?

And what's this IRR thingy?

For investment trusts, the AIC web site is good.

For funds, I tend to use Trustnet, but not sure how it works for comparisons.

IRR is internal rate of return, for which the Excel function XIRR will give you results for a given cash flow. For a simple share holding you need the purchase date and the cost as a negative value. Then each dividend paid is a positive entry with the date paid. Finally you need today's date and the current value of the holding as a positive entry. It then gives you the annualised rate of return on the investment.

TJH

[Alaric]

Yields over 5%. This seems almost suspiciously good.

Am I missing something here, do you think?

The dividenddata site quotes the dividend yield on the FTSE 100 Index as being 4.23% as of writing. With special dividends it quotes 4.59%.

https://www.dividenddata.co.uk/dividend ... alDiv=true

The dividend yield reduces with increases in the Index value, currently standing at 7622, which is high.
https://www.google.com/search?client=fi ... ndex+chart

The Vanguard funds replicate the index and charge around 0.15%, thus their dividend yield should slightly undershoot the index. By replicate, I mean that Vanguard buy all 100 shares in the Index in proportions which represent the market capitalisations.

You wouldn't get a yield over 5% by investing in the near future unless you buy when or if the Index drops back to around the 7000 mark. But you may be happy with 4.4% to 4.5% given that it's about three times what you get on cash.

[Gostevie]

You have three options that I can see.

Go for an Investment Trust which has a reasonable yield, which leads you to the B7 or B8 created by Luni.

Go for a fund, of which there are myriads. I hold two, M&G Dividend Fund with a yield of 4.95% and an IRR of 8.73%, and Threadneedle UK Equity Income, with a yield of 3.9% and an IRR of 7.72%. There are many more to look at. You can investigate ETFs is you wish.

Go for an HYP. You need to start from first principles, and I suggest that you go for at least 20 holdings, bearing in mind diversity.

TJH

(My bold in the above quote.)

Hello TJH

Given that the OP said...

Extra factor is my poor health, so our portfolio needs to be manageable for a widow uninterested and inexperienced in such matters.

...I can't help but think that a portfolio of shares in 20-plus individual companies would be too much of a burden, or at least a poor choice, for a widow of presumably advanced years herself. With absolutely no disrespect intended to you of course as you clearly do have an interest and lots of experience for which I am grateful that you share here.

Best wishes,

Gostevie

[UnclePhilip]

Yields over 5%. This seems almost suspiciously good.

Am I missing something here, do you think?

The dividenddata site quotes the dividend yield on the FTSE 100 Index as being 4.23% as of writing. With special dividends it quotes 4.59%.

https://www.dividenddata.co.uk/dividend ... alDiv=true

The dividend yield reduces with increases in the Index value, currently standing at 7622, which is high.
https://www.google.com/search?client=fi ... ndex+chart

The Vanguard funds replicate the index and charge around 0.15%, thus their dividend yield should slightly undershoot the index. By replicate, I mean that Vanguard buy all 100 shares in the Index in proportions which represent the market capitalisations.

You wouldn't get a yield over 5% by investing in the near future unless you buy when or if the Index drops back to around the 7000 mark. But you may be happy with 4.4% to 4.5% given that it's about three times what you get on cash.

But surely, as the fund info says they track shares in the FTSE with above average yield, the 5-6% becomes realistic?

I appreciate I need to look further into the Vanguard fund info (and I find the Vanguard navigation unusually complicated....)

[Alaric]

But surely, as the fund info says they track shares in the FTSE with above average yield, the 5-6% becomes realistic?

Certainly, you were looking at a fund which tracks a subset of the FTSE 350 Index, rather than a whole index such as the FTSE 100. The potential problem and risk is that a mechanical selection of shares is liable to automatically invest in dross. One problem with searching for high yield is where companies are falling on hard times. That gets reflected in the share price, but there can be a considerable lag before the management cuts or cancels the dividend. During that period, the share may come out as desirable on searches for high yield. A human fund manager might be able to screen and discard it, a constructor of an index may not be able to devise a suitable rule. The risk runs the other way as well, exclude a stock that will recover and performance is compromised.

[UnclePhilip]

But surely, as the fund info says they track shares in the FTSE with above average yield, the 5-6% becomes realistic?

Certainly, you were looking at a fund which tracks a subset of the FTSE 350 Index, rather than a whole index such as the FTSE 100. The potential problem and risk is that a mechanical selection of shares is liable to automatically invest in dross. One problem with searching for high yield is where companies are falling on hard times. That gets reflected in the share price, but there can be a considerable lag before the management cuts or cancels the dividend. During that period, the share may come out as desirable on searches for high yield. A human fund manager might be able to screen and discard it, a constructor of an index may not be able to devise a suitable rule. The risk runs the other way as well, exclude a stock that will recover and performance is compromised.

Thank you for this, very stimulating.

It seems to me that the risks of dross are mitigated somewhat by the greater diversification I'd get from a DIY HYP. And, of course, the risk of choosing an active manager who's poor is mitigated by choosing a spread of different fund managers?

Then if I pit this against the real issue of constructing something my widow won't be too bothered by, hmm....

I'd not heard of a tracker that passively tracks a higher-than-average-yield subset of the FTSE; have any on here had any experiences, or know more?

Gratefully,

Uncle

[tjh290633]

There is the ETF IUKD which tracks an index formed of the highest yielding shares on the FTSE. It had an unfortunate start because it was very heavy in financial shares, just before the 2008 crash. The index and the methodology has since changed, but I gave up following it.

TJH