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Just one IT for life

General discussions about equity high-yield income strategies
moorfield
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Just one IT for life

#444219

Postby moorfield » September 21st, 2021, 6:06 pm

Ok I'll start a separate thread from this one....

viewtopic.php?f=31&t=31320&p=444213#p444213

I'm interested in the risks of holding everything in just one IT, let's say MYI for arguments sake, in case I start feeling very very lazy and/or go really gaga. I would want to leave Lady M (and the Juniors) with very simple directions. Assuming the income produced is "enough", and happy with global diversification, then

Why bother with a basket?

richfool
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Re: Just one IT for life

#444231

Postby richfool » September 21st, 2021, 6:45 pm

moorfield wrote:Ok I'll start a separate thread from this one....

viewtopic.php?f=31&t=31320&p=444213#p444213

I'm interested in the risks of holding everything in just one IT, let's say MYI for arguments sake, in case I start feeling very very lazy and/or go really gaga. I would want to leave Lady M (and the Juniors) with very simple directions. Assuming the income produced is "enough", and happy with global diversification, then

Why bother with a basket?

There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes. They are relatively small and understandably have higher charges. The growth trust holds PNL and CGT from a defensive perspective.

BMPI - https://www.hl.co.uk/shares/shares-sear ... st-inc-shs

BMPG - https://www.hl.co.uk/shares/shares-sear ... rowth-shrs

I hold BMPI in my stamp collection.

Itsallaguess
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Re: Just one IT for life

#444235

Postby Itsallaguess » September 21st, 2021, 6:53 pm

moorfield wrote:Ok I'll start a separate thread from this one....

viewtopic.php?f=31&t=31320&p=444213#p444213

I'm interested in the risks of holding everything in just one IT, let's say MYI for arguments sake, in case I start feeling very very lazy and/or go really gaga.

I would want to leave Lady M (and the Juniors) with very simple directions. Assuming the income produced is "enough", and happy with global diversification, then

Why bother with a basket?


I'm totally on board with your 'gaga-plan', as it's something that I think is important to consider for the longer term, and especially where others might be expected to pick up at least some aspects of an ongoing investment package that they might not have had many dealings with up to 'that point'...

But, the plan I've got is a little broader than that, and looking towards a more 'basket' orientated approach to help with some issues I'd have with a 'single-IT' approach -

1. Given that there would still have to be 'some level' of instructions on how to pursue a 'single-IT' portfolio, I would ask how much more complicated such instructions would necessarily have to be if there were simply a slightly higher number of them for ongoing management, rather than just a single one. I'm yet to convince myself that there would be a huge difference between any two given sets of instructions...

2. I'd be concerned with taking a 100% focus on single-manager risk with just one IT. There's a number of risk aspects that might go along with that, from fraud at manager level, right down to risks in dividends not being paid, either at all or not on time, as well as lots of other perhaps less obvious back-office stuff that might just go wrong enough to pull a '100% focus' rug out from under people totally reliant on that single income source, and I'd have to ask myself if any benefits I *might* see from going all-in on a single IT would outweigh those risks...

3. I think there's additional benefits to taking a more basket-oriented approach, in terms of geographical and sectoral diversification, that wouldn't necessarily undercut too much in terms of 'additional workload' when compared to the expected workload of even a single-IT situation, and I think benefiting from a still relatively small, but broader set of income-IT's is likely to be worth it when compared to trying to find some sort of 'sweet-spot' single-IT solution that by it's nature is likely to be handicapped to some extent in either geographical or sectoral aspects, or perhaps even underlying charges etc..

So I think my over-riding thoughts would be to ask how many points of instruction might still be needed in a post-gaga 'single-IT' situation for people to get to grips with, and how many additional points of instructions might then need to be added over and above that 'single-IT' baseline instruction-set, to move from one IT to a small number of them, and I *suspect* it's not going to be a huge difference, but where the underlying investment benefits might then be worth aiming for...

Happy to be convinced otherwise though, and it's a good topic that does bear some thought.

What I would add though, is that I don't tend to think of it too much as a 'gaga plan', because that allows us to mentally put the formation of it off into some future requirement, and if we perhaps think of it as a 'hit by a bus' plan, then it tends to remind ourselves that it's immediacy might be a little closer and perhaps more abruptly announced...

Cheers,

Itsallaguess

ReformedCharacter
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Re: Just one IT for life

#444240

Postby ReformedCharacter » September 21st, 2021, 7:02 pm

Itsallaguess wrote:
So I think my over-riding thoughts would be to ask how many points of instruction might still be needed in a post-gaga 'single-IT' situation for people to get to grips with, and how many additional points of instructions might then need to be added over and above that 'single-IT' baseline instruction-set, to move from one IT to a small number of them, and I *suspect* it's not going to be a huge difference, but where the underlying investment benefits might then be worth aiming for...

Itsallaguess

That's very much my own thoughts. I know it's not an IT answer but to address the issue of simplicity and assuming the capital\income needs are met then a couple of Vanguard or similar index trackers might be worth a consideration.

RC

PhaseThree

Re: Just one IT for life

#444246

Postby PhaseThree » September 21st, 2021, 7:17 pm

I have also been considering the gaga phase investment strategy. Unfortunately I don't think that a single IT is the answer. The single manager risk of such an approach is too high in my opinion. It's also difficult to quantify underperformance and even more difficult to provide instructions as to how to execute a remedy .

My current plan is therefore to gradually move my IT investments over to a single global tracker (VWRL or similar) from the age of 70 onwards, unless ill health forces my hand before that point. I hope this will provide the "no tinker required" solution to a long decrepitude that I am looking for.

Newroad
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Re: Just one IT for life

#444264

Postby Newroad » September 21st, 2021, 8:57 pm

Hi Moorfield.

That could easily be a sensible approach. My guess is, were I going to adopt it, I would use VHYL (FTSE All-World High Dividend Yield UCITS ETF) or similar. This is low cost, with a modestly high and likely growing (in the sense the underlying ETF will likely rise in value, producing rising payments, even if the percentages remain similar) of 2.87%.

It carries the single manager risk, but I reckon a Vanguard physical ETF would be one of the last to fall in that context. Also, as far as reducing (lack of) diversification risk, it scores highly.

In the interest of full disclosure, I held MYI for a long time - it currently can't even beat the FTSE over many time periods (a pretty low bar to be measured against in context) and have never held VHYL. However, for the assumed purpose intended, it might be a Goldilocks choice. Some performance info below, source: TrustNet

Image

The choice of VHYL over, say, VWRL is one of ease of maintenance - not requiring the sale of units, only the reaping of distributions. I would expect VWRL to perform better over time on average.

I hope of some interest.

Regards, Newroad

tjh290633
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Re: Just one IT for life

#444293

Postby tjh290633 » September 21st, 2021, 11:23 pm

richfool wrote:There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes.

Isn't there a problem with "funds of funds" in that they incur two sets of charges, one from their own fund managers and the others from the funds in which they invest?

TJH

Dod101
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Re: Just one IT for life

#444303

Postby Dod101 » September 21st, 2021, 11:56 pm

tjh290633 wrote:
richfool wrote:There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes.

Isn't there a problem with "funds of funds" in that they incur two sets of charges, one from their own fund managers and the others from the funds in which they invest?

TJH


There is a problem there I will agree but remember London and St Lawrence? It was an IT that held shares I think only in other ITs and yet it did very well over the years. It converted itself into an OEIC I think mainly because Aviva wanted to sell its substantial holding In L & L.

My ga-ga plan is exactly the 30 shares I currently hold.

Dod

moorfield
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Re: Just one IT for life

#444337

Postby moorfield » September 22nd, 2021, 9:18 am

I agree that "single manager risk" is the key one here (Mr Woodford provides us an abject lesson) - but set against the backdrop of years and years of rising dividends one can appreciate the topic perhaps. The (mis)use and (mis)governance of leverage by the manager is in my mind what can cause the most damage, and quickly. Food for thought, thank you.

everhopeful
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Re: Just one IT for life

#444347

Postby everhopeful » September 22nd, 2021, 9:57 am

My "gaga" plan is to move everything in to a small basket of trackers and I have left instructions to that effect with my son if I do not have the time to enact it myself. My wife has no interest in running a portfolio and would not need income form the investments as 50% of my pension would transfer to her. We are very lucky that the great majority of our portfolio is held in my and my wife's ISAs so no tax applies. I am very concerned to ensure that all my ISA transfers to her ISA when I die which is possible under the present rules and would prevent her paying tax on a substantial holding. Again I have left instructions to make sure this is done.
I realise I have deviated from the "gaga" phase to the next but inevitable end point. By the way PhaseThree I am not sure I like you equating the age of 70 with the "gaga" phase although my nearest and dearest might take a different view!

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Re: Just one IT for life

#444350

Postby Charlottesquare » September 22nd, 2021, 10:12 am

The risk with a single IT, as you descend into Gaga Land, is that you totally take your eye off the ball and fail to spot the announcement that the trust has voted to change its investment strategy/focus. If you are being towed along for the ride by seven horses if one bolts hopefully your carriage does not overturn.

tjh290633
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Re: Just one IT for life

#444351

Postby tjh290633 » September 22nd, 2021, 10:13 am

everhopeful wrote:I realise I have deviated from the "gaga" phase to the next but inevitable end point. By the way PhaseThree I am not sure I like you equating the age of 70 with the "gaga" phase although my nearest and dearest might take a different view!

I am 18 years past that point, and am still contemplating how long I leave it before I make the change.

TJH

88V8
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Re: Just one IT for life

#444374

Postby 88V8 » September 22nd, 2021, 11:19 am

tjh290633 wrote:
everhopeful wrote:I realise I have deviated from the "gaga" phase to the next but inevitable end point. By the way PhaseThree I am not sure I like you equating the age of 70 with the "gaga" phase although my nearest and dearest might take a different view!

I am 18 years past that point, and am still contemplating how long I leave it before I make the change.

I too am the wrong side of 70, but I am still embellishing my sweetshop.
Perhaps that is the hobby aspect...

I agree though that a plan for the OH is a good thing. She would have no interest in joining the Lemon, and probably no need in terms of income.

To put everything into Vanguard would be a step too far for me in terms of risk concentration. Luni's B7 and B8 are models still running. https://www.lemonfool.co.uk/viewtopic.php?f=54&t=25362 The B8 was supposed to be fire-and-forget.

V8

Wuffle
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Re: Just one IT for life

#444377

Postby Wuffle » September 22nd, 2021, 11:28 am

I would have no issue whatever with leaving what I have in one IT.

Some examples, FCIT or CGT or MYI depending on your requirements.
Large IT's with experienced, qualified managers and support teams and boards, long histories of getting this fairly right.
A declared objective statement, demonstrable competence at the nitty gritty.
RIT is basically a family office, you are a family.

Denial of all of this when contemplating the relinquishing of the financial clout is just predictable human behaviour.
As one of the following generation, I am surrounded by friends in their forties and fifties whose parents won't write wills or see financial advisors (just one - which takes the management debate down a whole other road) for the sake of relinquishing the power.

Frankly I don't see how this is debateable from a genuinely distanced position - which is the hard bit!
Sidestepping the issue by going down the 'I think it should be an ETF' route has a whiff of the control thing as well.

W.

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Re: Just one IT for life

#444401

Postby Newroad » September 22nd, 2021, 12:22 pm

Hi Wuffle.

I think Charlotte Square's comment earlier is pertinent to your argument.

Let's say that investors become disenchanted with MYI's relative underperformance and force through a change, in manager and/or mandate. This may be missed by Moorfield's dependents (or they may see it but not be too savvy about if and how to react to it).

I would have less issue with FCIT than MYI in context, but even that venerable old trust carries the risk (see the pressure, say, on Alliance Trust not that long ago).

Conversely, something tracker or tracker-like, whether in ETF or OEIC form, is unlikely to carry this risk - so IMO is relatively more fit for purpose for this specific use case.

Regards, Newroad

richfool
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Re: Just one IT for life

#444448

Postby richfool » September 22nd, 2021, 1:49 pm

tjh290633 wrote:
richfool wrote:There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes.

Isn't there a problem with "funds of funds" in that they incur two sets of charges, one from their own fund managers and the others from the funds in which they invest?

TJH

Yes, as I said, they do have higher charges:
There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes. They are relatively small and understandably have higher charges.

Lootman
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Re: Just one IT for life

#444450

Postby Lootman » September 22nd, 2021, 1:53 pm

Dod101 wrote:
tjh290633 wrote:
richfool wrote:There are two IT's from the BMO stable, - one, BMPI (the Income portfolio) and the other, BMPG (the growth portfolio), that invest in a range of other IT's and which may be worthy of consideration for your purposes.

Isn't there a problem with "funds of funds" in that they incur two sets of charges, one from their own fund managers and the others from the funds in which they invest?

There is a problem there I will agree but remember London and St Lawrence? It was an IT that held shares I think only in other ITs and yet it did very well over the years.

One thing with the "fund of funds" ideas, as well as the doubling up of expenses, is also the doubling up of discounts to NAV. So if an IT is at a 15% discount to NAV and its underlying investments are also at a 15% discount, then you have an effective discount to NAV of 22.5%.

That can really juice performance when the market is going up, which of course is most of the time. But when the market goes down that counts against you.

Since I have a reasonable amount of confidence that I can pick suitable funds as well as professional managers, I personally avoid such vehicles.

richfool
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Re: Just one IT for life

#444466

Postby richfool » September 22nd, 2021, 3:32 pm

Lootman wrote:One thing with the "fund of funds" ideas, as well as the doubling up of expenses, is also the doubling up of discounts to NAV. So if an IT is at a 15% discount to NAV and its underlying investments are also at a 15% discount, then you have an effective discount to NAV of 22.5%.

That can really juice performance when the market is going up, which of course is most of the time. But when the market goes down that counts against you.

Since I have a reasonable amount of confidence that I can pick suitable funds as well as professional managers, I personally avoid such vehicles.

Though it's worth noting that such trusts often have exposure to less accessible or more specialist investments or asset classes, that not all of us have a detailed knowledge of..... For example, BMPI's holdings include several private equity trusts, biotechnology & healthcare trusts, property and fixed interest holdings, as well as the various geographies.

https://www.hl.co.uk/shares/shares-sear ... st-inc-shs

Arborbridge
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Re: Just one IT for life

#444501

Postby Arborbridge » September 22nd, 2021, 5:13 pm

The first thing is that I do not consider myself indispensible. My wife and children are not stupid and I have some confidence that they would pick up the reins and in time do their own thing: if they had to do it. I've explained that most of my investments can be just left to run, and nothing untoward would happen for many a long period. You could say my "plan" is rather like Dod's - let it run. The investments might even do better without me!

Having said all that, it is tempting to look around for some "one-stop shop" - though as soon as I think I have found one, the doubts creep in. Along those lines, I'd suggest something like Vanguard ETFs, VWRP or VWRL. One of these I've suggested for my daughter who has taken decades to come back to the stock market after a boyfriend of my Ex-wife recommended she put all her teenage savings into Leeds United FC. What an idiot - and what hurts is that I knew nothing about it until too late.

But as soon as you look at a world index tracker and realise that over 50% is in the US, you wonder: is that good? or bad? Then, would it be better to have this plus something else more managed - an IT from a large well known House? Monks, perhaps?...... and so the doubts and complexification begins, and you realise you cannot be proscriptive from beyond the grave.

Arb.

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Re: Just one IT for life

#444664

Postby Hariseldon58 » September 23rd, 2021, 10:58 am

Ignoring the questions of risk concentration, then the ONE Investment Trust has to be a generalist, Foreign & Colonial springs to mind. I have held it off and on for 30+ years, its done a good job. I prefer a low cost All World Tracker now, the IT cost’s more but the modest gearing probably negates the higher cost.

I have held VHYL again off and on, 10 years of VHYL, the World High Yield Tracker, has consistently disappointed compared to VWRL, otherwise the income stream would make life simpler.

Final thought would be Personal Assets if a cautious approach was required.

Despite wonderful results from Equity income form 1990 to 2007 for myself, it has been disappointing since then compared to a more Global Tracker approach ( For & Col is that in reality, if not in name)


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