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IT newbie

General discussions about equity high-yield income strategies
csearle
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IT newbie

#420469

Postby csearle » June 18th, 2021, 1:11 pm

Hi team.

I have asked this before of our Itsallaguess by PM but can't seem to locate his answer. I am now in the happy position of having a lump sum to get into my ISA bit by bit each year. At the moment the cash outside the ISA is earning minimal interest. My inclination is not to extend my HYP in unsheltered holdings because of all the buying/selling fees (also so as to simplify each year's action both in terms of the selling but also CGT calculation), but rather to buy into one or two investment trusts.

I have never bought into one of these before. I notice that in the trading part of my interactive investor account I can select EPICs that Itsallaguess lists in his tables so I am confident that I will be able to actually buy.

Basically I'm not quite sure if there is any great merit in diversifying into more than one IT. I am also not sure whether Discount/Premium is an initial buy-in incentive/fee or something else.

I am also not sure how often they pay out and whether there is an ex-div date like with individual shares?

Coupled with all of that is not really knowing which ones to lean towards/avoid.

As you can see I am floundering a bit and would appreciate any pointers.

Thanks,
Chris

csearle
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Re: IT newbie

#420482

Postby csearle » June 18th, 2021, 1:45 pm

csearle wrote:I am also not sure how often they pay out and whether there is an ex-div date like with individual shares?
Well I've just found some ex-div dates, so I suppose that answers that one. :) C.

ReformedCharacter
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Re: IT newbie

#420487

Postby ReformedCharacter » June 18th, 2021, 1:51 pm

csearle wrote:
I am also not sure how often they pay out and whether there is an ex-div date like with individual shares?

A lot (all of mine) pay quarterly and have ex-div dates like individual company shares.

csearle wrote:Coupled with all of that is not really knowing which ones to lean towards/avoid.

As you can see I am floundering a bit and would appreciate any pointers.

Thanks,
Chris

Trustnet is a very useful resource if you haven't come across it before:

https://www.trustnet.com/

RC

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Re: IT newbie

#420489

Postby monabri » June 18th, 2021, 1:53 pm

AIC is a good starting point.
https://www.theaic.co.uk/


Dividend Data has a separate listing of Investment Trusts - lists out previous dates when divi went XD/paid.
https://www.dividenddata.co.uk/investme ... -yields.py


The "premium/discount" essentially is a calculation of what each share is worth by adding up the assets held and dividing by the number of fixed shares. So, if an IT is trading at , say, a 10% premium to Net Asset Value (NAV) you are "paying over the odds" (why one would do this is a discussion in iteself). If you are paying over the odds for the assets held in the IT, you would need to have some consideration as to why one would want to do this.


I'm sure you'll have little problem in buying ITs using Interactive Investor.

The merit of "diversifying into more than one IT" ... now that needs further clarification on your part (what are your thinking of buying) as I would take a contrary view.

As for which ones to consider..what are your goals...income, growth, diversification?

monabri
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Re: IT newbie

#420492

Postby monabri » June 18th, 2021, 2:00 pm

Dividend Data lists out the ITs and you can click on the "+" sign to expand. This gives an idea of the dates when the IT went xd, paid along with the divi.

The AIC website (link as previous) will also list out all previous dividends and so you can see if the dividend is increasing or not.

source
https://www.dividenddata.co.uk/investme ... =ADIG#ADIG


Image

SalvorHardin
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Re: IT newbie

#420494

Postby SalvorHardin » June 18th, 2021, 2:03 pm

Think of investment trusts (ITs) as companies whose business is to run an investment portfolio. You buy and sell their shares in exactly the same manner as operating companies, there are no additional fees to pay. The annual management fees charged by the IT's manager are taken from the trust's assets.

Just like operating companies, investment trusts have ex-dividend and dividend payment dates. Many pay two dividends a year, some quarterly and others either one or none. You should be able to find this information on the trusts' website. Failing that there are the usual stock exchange RNSs and sites such as Investegate which carry most of the RNSs for every investment trust. Trustnet is another good website.

There are a few differences between ITs and operating companies, notably that ITs are required to pay out a certain proportion of their income (after costs) and that capital gains realised when the investment trust sells assets are not liable for CGT (investors pay CGT when they sell their shares in the same manner as selling shares in an operating company).

Discount is found by comparing the share price with the value of the trusts' assets per share, known as the NAV (net assets per share). This is simply the market value of all the trust's assets minus the total of all of the trust's liabilities. So if a share is trading at 240p and its most recent NAV per share is 255p then its shares are trading at a discount to the NAV of 1 - 240/255 = 5.9% discount. Similarly if the NAV was 230p then the shares are trading at a premium of 240/230 - 1 = 4.3%.

The benefits of diversifying into more than one investment trust is the same as diversifying into more than one operating company. Also you can use investment trusts to invest in parts of the world that are difficult for private investors, such as India. In addition, some investors (like me) will argue that using multiple ITs this reduces your risk to manager and custodian fraud (because your investment is split between two providers).

I know of at least one poster on TLF who has the vast majority of their portfolio in just the one investment trust. That would worry me so I currently hold 13 different ITs. My largest three holdings are Finsbury Growth and Income (large cap strong brands), Foreign & Colonial (now called F&C, the oldest IT which is a hugely diversifed international fund) and Templeton Emerging Markets (does what it says on the tin). My smallest IT holding is Henderson Far East Income which has a very large yield of 7%.

Hope this helps

Warning: REITs (Real Estate Investment Trusts) are not investment trusts. REITs are property companies with a more favourable tax treatment.
Last edited by SalvorHardin on June 18th, 2021, 2:11 pm, edited 2 times in total.

tjh290633
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Re: IT newbie

#420495

Postby tjh290633 » June 18th, 2021, 2:04 pm

csearle wrote:Hi team.

I have asked this before of our Itsallaguess by PM but can't seem to locate his answer. I am now in the happy position of having a lump sum to get into my ISA bit by bit each year. At the moment the cash outside the ISA is earning minimal interest. My inclination is not to extend my HYP in unsheltered holdings because of all the buying/selling fees (also so as to simplify each year's action both in terms of the selling but also CGT calculation), but rather to buy into one or two investment trusts.

I have never bought into one of these before. I notice that in the trading part of my interactive investor account I can select EPICs that Itsallaguess lists in his tables so I am confident that I will be able to actually buy.

Basically I'm not quite sure if there is any great merit in diversifying into more than one IT. I am also not sure whether Discount/Premium is an initial buy-in incentive/fee or something else.

I am also not sure how often they pay out and whether there is an ex-div date like with individual shares?

Coupled with all of that is not really knowing which ones to lean towards/avoid.

As you can see I am floundering a bit and would appreciate any pointers.

Thanks,
Chris

Chris, for what it's worth, I have been investing for my grandchildren in ITs for up to 20 years now. I used a different IT for each of them initially, but various events has two of them in the same one. Results vary because of differing lengths of exposure, but in my view there is little to choose between Alliance, F&C and Witan. There are plenty of others, of course, and the past is no guide to the future, but all have given IRRs around 10% and look like continuing to do so, barring catastrophic market movements.

I think that you could use one or more ITs of your choice and be content with the results.

TJH

csearle
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Re: IT newbie

#420496

Postby csearle » June 18th, 2021, 2:05 pm

monabri wrote:AIC is a good starting point.
https://www.theaic.co.uk/


Dividend Data has a separate listing of Investment Trusts - lists out previous dates when divi went XD/paid.
https://www.dividenddata.co.uk/investme ... -yields.py


The "premium/discount" essentially is a calculation of what each share is worth by adding up the assets held and dividing by the number of fixed shares. So, if an IT is trading at , say, a 10% premium to Net Asset Value (NAV) you are "paying over the odds" (why one would do this is a discussion in iteself). If you are paying over the odds for the assets held in the IT, you would need to have some consideration as to why one would want to do this.


I'm sure you'll have little problem in buying ITs using Interactive Investor.

The merit of "diversifying into more than one IT" ... now that needs further clarification on your part (what are your thinking of buying) as I would take a contrary view.

As for which ones to consider..what are your goals...income, growth, diversification?
Thank you. Well I think I appreciate that these things are effectively already diversified within their own sector, so presumably the only value with going for more than one is to mitigate against the downfall of a sector over the time-frame of the investment.

My goal would be simply to get a better return than cash over a time frame of about seven years. I realise that is borderline short-term but I am more the kind of person that would take some risk in order to better the half a percent I can get as cash. I suppose also that over that time frame it is also a bit of a gamble.

Chris

csearle
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Re: IT newbie

#420497

Postby csearle » June 18th, 2021, 2:08 pm

SalvorHardin wrote:Think of investment trusts (ITs) as companies whose business is...

Hope this helps
It does indeed. Thank you for that, excellent.

Chris

csearle
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Re: IT newbie

#420498

Postby csearle » June 18th, 2021, 2:10 pm

Thank you to all. That was a great response and I will do some looking around those sites.

Cheers,
Chris

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Re: IT newbie

#420517

Postby dundas666 » June 18th, 2021, 3:31 pm

I use this site too for dividend info:
https://www.dividendmax.com/united-king ... /dividends

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Re: IT newbie

#420606

Postby fisher » June 18th, 2021, 7:52 pm

I have posted the link to this article from 2020 looking at 20 Global Investment Trusts and how they have performed over the last 3 decades a few times in various threads recently. I think it is well worth looking at alongside other IT options: https://www.itinvestor.co.uk/2020/06/20 ... -compared/

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Re: IT newbie

#421180

Postby funduffer » June 21st, 2021, 4:09 pm

Chris,

I put together an IT portfolio for generating income a few years ago.

The criteria I used for selection were that having purchased the portfolio, it should on average have:

1. A yield >4%
2. Cost (TER) <1%
3. Dividend growth over previous 5 years >3%
4. Discount to NAV <0%

I achieved this in 2014 and I have been satisfied ever since. It may be more difficult today after covid!

The other thing I would do is spread the portfolio across a few IT's covering both the UK, and international markets.

IT's originally purchased in the portfolio;

City of London (CTY) - Mainly UK
Dunedin Income and Growth (DIG) - Mainly UK
Aberdeen Standard Equity Income (ASEI) - Mainly UK, some smaller companies
BMO Capital and Income (BCI) - Mainly UK
Scottish American (SAIN) - UK + North America
Henderson Far East (HFEL) - Far East
Murray International (MYI) - Mainly international
Blackrock World Mining (BRWM) - Commodities

Good Luck

FD

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Re: IT newbie

#421306

Postby 1nvest » June 22nd, 2021, 12:17 am

Whilst you might be content to just focus on dividend yield/income (HYP), as you're extending diversification why not also diversify style. Perhaps Foreign and Colonial (FCIT) - a form of global stock index fund, combined with Personal Asset Trust (PNL) which might be considered more of a bond-like holding (defensive). Weight the two as you might a stock/bond blend, Benjamin Graham suggested 50/50 for most, but optionally no more/less than 75/25 - 25/75.

Both are lower yielders, so draw your own income out of total returns, at times and amounts of your own choosing. I like to draw from total return monthly - as though a regular wage (I'm with ii, so I get a 'free' trade each month, so login, sell some shares in whichever is the most above its target % weighting, and a few days later (T+3) transfer the cash to my linked bank account).

Not specific suggestions, I hold neither - but likely would choose those two if I did.

As for how much to draw, you could match the same dividend yield that your HYP holdings were paying. Personally I just draw what I need, more like a regular wage type amount. Some dislike selling shares when prices are down, but mostly prices tend to be making new highs, broadly the two wash.

From a very quick glance, looks to me that since 1998 50/50 FCIT/PNL whilst individually being much the same as their benchmarks (nothing outstanding, just average), that yielded similar total returns to that of Terry's Accumulation HYP, but with significantly less volatility. Tempted to open a Freetrade account and throw some into both of those myself (to try out both that smartphone based brokerage, and buying IT's). From their available stock list https://freetrade.io/stock-list#stock-list-table it looks like both FCIT and PNL are available via Freetrade's General Investment Account (from what I've seen I wouldn't bother with their PLUS account).

88V8
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Re: IT newbie

#421362

Postby 88V8 » June 22nd, 2021, 11:11 am

csearle wrote:...to buy into one or two investment trusts....

Growth or income?
Some will say that one can do both.
And some favour TR.

I am retired, not a TR fan, not really bothered about growth.

So my portfolio recently assembled as I am a new convert to ITs, was chosen for yield, reliability, plus a bit of less reliability but diversification as I have a UK-centric tendency that I need to combat.

If you want income, now, it could suit you.

ASEI
BERI
BIPS
CTY
HFEL
JCH
JETI
LWDB
MAJE
MCT
MRCH
MUT
NCYF
SEQI
SHRS

Some of the yields have fallen since I bought although all are way better than cash... If I were to pick two right now, it would be ASEI Aberdeen Income and HFEL Henderson Far East. Both have juicy yields and long records of no divi cuts.

As to putting your eggs in one or two baskets, I think one should diversify managers in the same way that one diversifies shares.
No manager is perfect all the time.
How many is enough? Dunno, Luni has his B7 and B8, but I think these will do me.
We have about 25% of our invested assets in that basket, mid six figures, just to give you an idea.

V8

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Re: IT newbie

#421455

Postby AshleyW » June 22nd, 2021, 8:07 pm

The AIC is a good starting point followed by trustnet´s portfolio tools to examine the performance of your proposed choices. Have a look at the annual accounts to put together the actual dividend payments - I like to see how they held up during and post 2008 crash - most annual accounts will give you 10 years actual dividends and if you go back to accounts from 2011 you can get data from around 2000. The IT income retirement portfolio on RetirementAce works well with a strong historic dividend performance and I think all constituents maintained dividends this year.

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Re: IT newbie

#421619

Postby 1nvest » June 23rd, 2021, 2:20 pm

Cross link. Found and posted this viewtopic.php?p=421474#p421474 ... If you only hold PAT (PNL) shares in a ii account then PNL pays the ii fees/costs


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