I'll show you mine if you show me yours - your portfolio!

[Dod101]

Something like that.
Offense wins games... defense wins championships etc.

I think your portfolio will outperform absolutezero's over the next 2 - 5 years

Yes but the question is outperform in what way? Income or total return? It is not that difficult to produce a decent income, but to produce a sustainable income and one where the income is not killing much chance of capital gain is more difficult. See HFEL in particular but also of course the much espoused City of London and quite a number of high yielding shares (the ones that moorfield appears to be going for) I am not saying he is wrong; it sounds like a good plan and not altogether unlike what I do, but as I have got older I appreciate total return much more these days.

Dod

£s are fungible. A £ is a £ is a £. So only total return matters if we are doing any kind of comparison.
See also 'dividends are only giving back some of your own money'.

I am aware of that but I I think it is still worth asking because of course moorfield was discussing income in particular.

Dod

[moorfield]

Yes but the question is outperform in what way? Income or total return? It is not that difficult to produce a decent income, but to produce a sustainable income and one where the income is not killing much chance of capital gain is more difficult. See HFEL in particular but also of course the much espoused City of London and quite a number of high yielding shares (the ones that moorfield appears to be going for) I am not saying he is wrong; it sounds like a good plan and not altogether unlike what I do, but as I have got older I appreciate total return much more these days.

At least it's a (long term) plan, and I generally don't see many of those here. I find income easier to measure, forecast and extrapolate than I do total return. And that makes it easier to make trading decisions, especially selling ones, and plan for the future.

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

[Dod101]

Yes but the question is outperform in what way? Income or total return? It is not that difficult to produce a decent income, but to produce a sustainable income and one where the income is not killing much chance of capital gain is more difficult. See HFEL in particular but also of course the much espoused City of London and quite a number of high yielding shares (the ones that moorfield appears to be going for) I am not saying he is wrong; it sounds like a good plan and not altogether unlike what I do, but as I have got older I appreciate total return much more these days.

At least it's a (long term) plan, and I generally don't see many of those here. I find income easier to measure, forecast and extrapolate than I do total return. And that makes it easier to make trading decisions, especially selling ones, and plan for the future.

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I hope I did not come across as being critical because I am very sympathetic to your plan; it is in fact not unlike what I have been doing for some years (concentrating on income that is). Those who keep on about money being fungible (I think they just like the word) are probably mostly not depending on an income from their investments or at least not solely. If they were they would see the benefit and satisfaction gained from the arrival of dividends in their bank accounts on a fairly regular basis without any decision being required by them as to what and when to sell to create this so called income.

However, having had some years of poorish capital returns from the typical HYP like share (to name a few, the tobaccos, big pharma, banks and a number of finance shares such as Schroders) it is good to see a few shares growing their capital as well as their mostly modest dividend. I can I suppose look for a total return because recurring dividends are now a bit more than I need for day to day living expenses.

Dod

[Newroad]

Hi Moorfield.

To answer your question, as I guess I am a "Total Returner" in context

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I suppose my answer would be an appropriate risk-adjusted return given our investment means (and management appetite). I/we don't have any specific goals - we'll just cut our cloth in context when the time comes*. To me, doing anything other than this IMO involves taking too much risk or too little risk, of different types - in either case jeopardising the chances of a decent/optimal outcome, in different ways.

I note you earlier said

The ultimate goal of my portfolio is quite simple - a natural yield income exceeding the higher rate income tax threshold by the early 2030s, £50270 in today's money. (I figure that's about as much as one wants to draw from a SIPP wrapper before being clobbered hard with tax.)

I suspect "natural yield" is ill-defined and believe it has caused arguments before. My intent is not to re-open that wound but to make an assumption for purposes of discussion. I believe you broadly intend

An actual dividend yield achieving what you say above, with
Capital growth in rough proportion so that the above dividend yield remains broadly constant in real terms over time

Assuming this, as I said, to be broadly accurate, it is subject to various vagaries, in particular, legislative risk (who knows, there may even be a flat taxation rate by then)! So, turning that around, I would have thought a target for you might instead by

The future equivalent of as near as practical to ...
The maximum non-higher rate income via dividend yield, c £50K, plus (if you have or may have non-sheltered investments)
The maximum capital gain without being taxed, c£12K

In any case, your approach is fundamentally different to ours - you have a fairly literal target, I/we don't have - but rather have a risk-related method of sorts.

Regards, Newroad

* We do have a nominal retirement date planned, similar to your own, but if one or both of us go earlier, by choice or force, so be it

[tjh290633]

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I reckon that something of the order of 10% is about right. It will vary from time to time and, in the years at the end of the 20th century, I was seeing over 13%.

The big global ITs are about 10% for the last 20 years.

With 10% you double every 7 years without withdrawing cash, but if you do then it will be longer.

TJH

[dealtn]

Yes but the question is outperform in what way? Income or total return? It is not that difficult to produce a decent income, but to produce a sustainable income and one where the income is not killing much chance of capital gain is more difficult. See HFEL in particular but also of course the much espoused City of London and quite a number of high yielding shares (the ones that moorfield appears to be going for) I am not saying he is wrong; it sounds like a good plan and not altogether unlike what I do, but as I have got older I appreciate total return much more these days.

At least it's a (long term) plan, and I generally don't see many of those here. I find income easier to measure, forecast and extrapolate than I do total return. And that makes it easier to make trading decisions, especially selling ones, and plan for the future.

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I hope I did not come across as being critical because I am very sympathetic to your plan; it is in fact not unlike what I have been doing for some years (concentrating on income that is). Those who keep on about money being fungible (I think they just like the word) are probably mostly not depending on an income from their investments or at least not solely. If they were they would see the benefit and satisfaction gained from the arrival of dividends in their bank accounts on a fairly regular basis without any decision being required by them as to what and when to sell to create this so called income.

However, having had some years of poorish capital returns from the typical HYP like share (to name a few, the tobaccos, big pharma, banks and a number of finance shares such as Schroders) it is good to see a few shares growing their capital as well as their mostly modest dividend. I can I suppose look for a total return because recurring dividends are now a bit more than I need for day to day living expenses.

Dod

Why this continuous criticism? Total Returners also receive dividends and don't necessarily go out of their way to avoid them. What's more they will enjoy and benefit from them. After all they represent a return - a subset of Total Return. Do income investors not also enjoy capital gains? Maybe in some parallel universe they eschew them and contentedly only sell at the purchase price or donate any excess as profits to others as it's either not needed or allowed as they are income investors.

Is it just easier to be disparaging to others rather than realise we are all Total Returners?

[dealtn]

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

Most people would be happy to compound at a real return of 5% I would think. But income investors are also Total Returners, the same legitimate question should be asked of them too surely. (And in the practical non-forum world asked by them to themselves).

If you are investing over 15-20 years do you want your dividends to grow? Do you want your yield to grow? Do you want the value of your capital to grow? What Total Return and growth in your income should you be aiming for?

If such questions are deemed irrelevant are you really claiming you would prefer a strategy that saw a £100k capital with a 5% dividend yield that had no growth over that time frame and still delivered £5k income over one that paid 2% but capital grew and compounded at 4%? Why?

[moorfield]

Why this continuous criticism? Total Returners also receive dividends and don't necessarily go out of their way to avoid them. What's more they will enjoy and benefit from them. After all they represent a return - a subset of Total Return. Do income investors not also enjoy capital gains? Maybe in some parallel universe they eschew them and contentedly only sell at the purchase price or donate any excess as profits to others as it's either not needed or allowed as they are income investors.

Is it just easier to be disparaging to others rather than realise we are all Total Returners?

Of course we are all total returners in one way or another. If I am critical of anyone or anything it is of those who propound total return theory but haven't really articulated what they are ultimately trying to achieve (ie. an income, in most cases),

Newroad has said it himself:

I/we don't have any specific goals - we'll just cut our cloth in context when the time comes*.

Or in other words, hitting and hoping? (that is not intended to sound disparaging, and I have recced!)

Reinvestment of dividend income is just as effective an approach but much easier to manage and importantly, forecast into the future, in my view.

[Dod101]

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I reckon that something of the order of 10% is about right. It will vary from time to time and, in the years at the end of the 20th century, I was seeing over 13%.

The big global ITs are about 10% for the last 20 years.

With 10% you double every 7 years without withdrawing cash, but if you do then it will be longer.

TJH

By reinvesting dividends, I would have thought that over a longish period, 10% per annum as a total return would be achievable. However, there will be some years when that will definitely not happen and others when returns may be more. I do not reinvest dividends though and so am in no position to illustrate that one way or another.

Dod

[Dod101]

Why this continuous criticism? Total Returners also receive dividends and don't necessarily go out of their way to avoid them. What's more they will enjoy and benefit from them. After all they represent a return - a subset of Total Return. Do income investors not also enjoy capital gains? Maybe in some parallel universe they eschew them and contentedly only sell at the purchase price or donate any excess as profits to others as it's either not needed or allowed as they are income investors.

Is it just easier to be disparaging to others rather than realise we are all Total Returners?

Anyone who disagrees with anyone else here is according to some, disparaging him/her. I am just not sure that all money/gains in this context is fungible. I take that word to me 'easily exchangeable' and/or, 'the same'. I do not think that a dividend arriving in one's bank account as hard cash is at all the same as a paper gain in the capital price. If you are dependent on income from your investments, putting the emphasis by setting a target for it seems to me to be perfectly sensible. I do that but at the same time, I have some shares where I regard the capital gain to be more important and putting the two together gives me what I feel comfortable with.

Dod

[Aminatidi]

Tell me total returners, what's a reasonable return to be aiming for in 15-20 years time, and why?

I'm young enough to be doing back of a napkin maths but all I've done is look at how I've invested and try and assume those kind of long term returns continue.

So I said I was heavy on Ruffer and Capital Gearing Trust and the third leg of the stool is probably similar to LifeStrategy 60.

If I look at the long term record of those three (harder with LifeStrategy) around 6% seems a fair assumption though maybe a bit optimistic?

I just bang that into a compound interest calculator and try and take into account ongoing contributions.

[monabri]

Discussion from a few years ago ( TJH post Dec 17...just the other day ("tempus fugit" ).

viewtopic.php?p=107080#p107080

[Dod101]

Discussion from a few years ago ( TJH post Dec 17...just the other day ("tempus fugit" ).

viewtopic.php?p=107080#p107080

As always you have found an interesting thread. So Terry's 10% looks realistic as a TR and his historical records prove their worth!

Dod

[Newroad]

Hi Terry et al.

I'm not sure a straight percentage expectation is that helpful (though it may be accurate in a literal sense over a given time period).

If going to express as a percentage, then it probably needs to be anchored to something, i.e. be relative rather than absolute. If you are implicitly assuming that CPI remains anchored to around 2% for example, then fair enough - but it may not.

Further, and here is where the risk element comes in, variability around return matters. I may yet prove to be wrong (and indeed, I am conducting my own real world experiment in this, so I now have a foot partially in both camps) but imagine one could construct two theoretic/synthetic portfolios

A selection of high yielding FTSE350 shares
A selection of global equities/global bonds

yielding a similar total return, if "untouched". I would suggest that the latter portfolio, with rebalancing (mainly when equities drop and bond don't, or don't as much) is likely to do better in the real world than the former over the long term.

Regards, Newroad

[Itsallaguess]

I may yet prove to be wrong (and indeed, I am conducting my own real world experiment in this, so I now have a foot partially in both camps) but imagine one could construct two theoretic/synthetic portfolios

A selection of high yielding FTSE350 shares
A selection of global equities/global bonds

yielding a similar total return, if "untouched".

I would suggest that the latter portfolio, with rebalancing (mainly when equities drop and bond don't, or don't as much) is likely to do better in the real world than the former over the long term.

I'm always a little nervous to see the word 'better' in these types of conversations, because it assumes from the off-set that two groups of investors are looking for the same 'single outcome', but are wanting to compare different methods of achieving it.

But don't we accept that 'income seekers' value the 'delivery-mechanism' as having a higher personal value over the 'actual total return'?

And don't we accept that 'TR seekers' value the 'actual total return' as having a higher personal value over the 'delivery mechanism'?

If we might generally accept those two points, then it begins to question the validity of then trying to compare both approaches using a single metric that clearly isn't being seen as having equal personal value between the two investor groups.

Simply put, the word 'better' means different things to different investment strategies, and I think most of the heat around comparisons of these two particular strategies seems to arise from the desire of one group or the other to ignore this really quite simple point...

Cheers,

Itsallaguess

[dealtn]

Why this continuous criticism? Total Returners also receive dividends and don't necessarily go out of their way to avoid them. What's more they will enjoy and benefit from them. After all they represent a return - a subset of Total Return. Do income investors not also enjoy capital gains? Maybe in some parallel universe they eschew them and contentedly only sell at the purchase price or donate any excess as profits to others as it's either not needed or allowed as they are income investors.

Is it just easier to be disparaging to others rather than realise we are all Total Returners?

Of course we are all total returners in one way or another. If I am critical of anyone or anything it is of those who propound total return theory but haven't really articulated what they are ultimately trying to achieve (ie. an income, in most cases),

Newroad has said it himself:

I/we don't have any specific goals - we'll just cut our cloth in context when the time comes*.

Or in other words, hitting and hoping? (that is not intended to sound disparaging, and I have recced!)

Reinvestment of dividend income is just as effective an approach but much easier to manage and importantly, forecast into the future, in my view.

Most have the same objectives as others, particularly when building and/or reinvesting pre-retirement or drawdown. Building a suitably large enough pot to live off at some future date. I would say it more odd in that situation to be restricting the portfolio of investable instruments to a pool of high yielding (and often large and UK) equities and as a result also reinvesting more.

You might find it easier to manage and forecast your future income from current dividends, but how easy is it to forecast your dividends in say 10 years time without a view on retained earnings, dividend pay out ratios, internal rates of returns on capital etc. I would suggest any such forecast is an extrapolation of existing dividends on past dividend growth. Easier certainly but my view would be that has downsides in predictability. The last 2 years surely demonstrate that. How would such predictions for 8 years out be made now? How do they compare with those for 10 years made 2 years ago. Maybe easier and ignoring updates and only adjusting forecasts every 6 months base on actual dividend announcements is ok for some. That approach isn't ok for the market, most investment professionals and some private investors though.

I think you will find most investors labelled as Total Returners aren't just "hitting and hoping" they are just adjusting more frequently and looking at multiple variables in their assessment and accepting that adjusting spending is also a possibility for the future too (cutting the cloth). Income investors, or those that only analyse dividends, or use such as determinants of any investment decision are more likely to be limiting choices and potential suffering as a result of that dogmatism. I would suggest they are trading off "easier" with "hitting and hoping" not the other way round. And again, like you thats not a criticism, there are benefits of simplicity, and even sub-optimal total return, should it occur, is better than many who make little financial provision and truly are "hoping" for a good outcome.

[Newroad]

Hi ItsAllAGuess.

I think what I wrote above is expressed neutrally and the intent, with the surrounding context, is quite clear. If someone wants to take issue with the terminology (rather than it's predictive accuracy - which of course, is fair game) then I suggest they are simply looking for an argument for its own sake and/or being obtuse.

I observe that you feel you are the policeman of this everyone has there own view/needs thing - but sometimes, people have written something reasonably and you need to hope that sensible forum participants respond in kind.

Regards, Newroad

[moorfield]

Discussion from a few years ago ( TJH post Dec 17...just the other day ("tempus fugit" ).

viewtopic.php?p=107080#p107080

As always you have found an interesting thread. So Terry's 10% looks realistic as a TR and his historical records prove their worth!

Dod

Thanks to Gengulphus and MDW we also have some interesting data derived from the "accumulation" version of HYP1, here. One may disagree with the premise of Gengulphus' model (ie. buy all of the shares already in the portfolio in proportion to the existing holdings) and note he did not recommend it, but nonetheless MDW's least squares charts provide some very useful results over the 20 year period.

Growth rate of accumulated capital = 8.5%
Growth rate of accumulated income = 9.7%

That is my favourite thread/discussion and most useful (to me) of all here on LF.

[Itsallaguess]

I think what I wrote above is expressed neutrally and the intent, with the surrounding context, is quite clear. If someone wants to take issue with the terminology (rather than it's predictive accuracy - which of course, is fair game) then I suggest they are simply looking for an argument for its own sake and/or being obtuse.

I observe that you feel you are the policeman of this everyone has there own view/needs thing - but sometimes, people have written something reasonably and you need to hope that sensible forum participants respond in kind.

With respect, I don't think that's fair.

If someone was 'running an experiment' to compare 100m race-times for both runners and swimmers, and the experiment came back to say that running was much 'better' than swimming in terms of finish-times, then I'm simply asking if consideration was being made to take into account what those swimmers might actually feel is 'better' for them in terms of reasons to continue with the sport they clearly get a lot of personal value from, if the result from that experiment only chose to look at one particular timing aspect, which was an aspect that swimmers have never actually claimed as being superior in the first place...

I hope my record on these boards will show that I've always tried to find common ground in this particular discussion, and I don't think trying to do so needs to be labelled as 'looking for an argument'...

Cheers,

Itsallaguess

[Newroad]

Hi ItsAllAGuess.

I wasn't actually referring to you the argument, but rather, those who you would presume to protect when a "little nervous".

However, I now think you're trying to set up a straw man as part of a defence that was not needed in the first place. I maintain that my original post which you presumed to protect one or more groups from is neutral and not reasonably open to material misunderstanding.

As before, if others understand it (and I believe all but the most obtuse probably do) but disagree with my assertions/conclusions, then those assertions/conclusions are fair game as I previously noted.

Regards, Newroad