funduffer wrote:I am new to this thread.
I just did a model over 5 years - May 2016 to May 2021.just as an illustration to myself.
I compare a global equity (accumulation) tracker, Scottish Mortgage IT (SMT) and City of London IT (CTY) as vehicles for generating income.
I assume £100K is invested in May 2016, and each May income is withdrawn equal to that yielded by CTY in the previous year.
So for CTY, no shares are sold, and the income comes purely from dividends
For SMT, some income comes from dividends, and the rest is generated by selling down enough shares each year to generate the same income as CTY.
For the tracker, I assume units are sold each May to generate the same income as CTY,
Results after 5 years:
CTY: £24005 total dividend income generated, Capital value = £103359
SMT: £24005 income (£5853 dividends + £18152 from capital), Capital value = £422076
Tracker: £24005 income (all from capital), Capital Value = £171922
Interesting, but I am not sure how it would look in a bear market, although there has been a pandemic in the last 5 years!
FD
These are very interesting figures I must say and although we can all get carried away with the amazing figures from SMT, the returns are calculated over a five year period which is reasonable I think. They reinforce the idea that income shares have been a very poor investment certainly in the UK in recent years. We all knew that I guess, but I am always wary of selling capital to sustain income, so I tend to go for both ends, dedicated income shares as well as shares offering a total return. Not surprisingly CTY simply reflects the UK income share market and even they are now using capital to bolster their income.
Dod