Income portfolio opinions

[88V8]

Dear V8. I could write a book on my choices and will happily expand on my philosophy but most I think know it already. Sadly I have made enough posts!

Well to save the OP some ferreting if he wishes to know Dod's philosophy, here was Dod's 2019 portfolio, which imho is potentially of interest because he has frequently mentioned that he lives off the income.

Subsequently he mentioned here that
'I lost Mucklow to a takeover, and have since added back SSE, added 3i Infrastructure, and a couple of Canadian banks, TD Bank and Bank of Montreal, and both have enhanced their yield by currency movements.
No new money but funded by sales of Edinburgh, Temple Bar, Vodafone and HFEL. In retrospect I could have kept Edinburgh and Temple Bar but never mind. Glad to have lost Vodafone and HFEL'.

So there you have the carefully cultivated portfolio of a long-time investor whose living depends on it.

Make of that what you will.

V8

[Dod101]

Well, no. Because the site's rules are very explicit on that:

Users should note that absolutely no discussions regarding finance or investments should be given or taken as 'advice', and is given and received only as the personal opinions of the posters themselves.

But this is just usual bum covering legal clause to protect the site. I see posters clearly asking for advice and being provided with it on a daily basis. You can call it an opinion but would it stand up in court? Interesting you missed out the first part of that rule:

Any views expressed herein remain the responsibility of the user posting the views. LemonFool takes no responsibility for the content posted by its members.

The best way is to say "If it were me, I would do so-and-so", or something similar. Qualified with "It's up to you to decide what to do". If people suggest that the OP considers alternative options, that is merely discussion between peers. As I see it, giving advice is telling the OP to buy so and so, or to sell something. Discussing alternatives is definitely not.

TJH

It depends on what the so-and-so is but you're right. Most of the discussions on this site are what the FCA would consider as guidance, which is fine, anyone can provide guidance. However, as soon as you instruct someone to buy or sell an investment you are unequivocally providing advice and if you are not an FCA authorised adviser you have crossed the line and broken FCA regulations. Apart from the sheer arrogance and lack of empathy for the OP displayed in the post, this is what I was objecting to. It's a total no go - you cannot tell anyone to buy or sell an investment regardless of the rules of this site. The FCA definition of what constitutes advice is very clear.

All the best, Si

'I would sell the lot' is not giving advice under any interpretation. Personally I would sell the lot as well but everyone knows that posters here are not providing advice. It is more like a chat in a pub. we are not sitting across a desk listening for morsels of wisdom to be dropped in our ears.

Dod

[JohnW]

I’m a long way from knowing the FCA rules etc, but….
It’s ‘illegal’ in the sense of punishably wrong to pretend to be a doctor, take a medical history from a person, feel their pulse, look at their tongue and measure their blood pressure, and go on to say ‘you’re ok’ or ‘do this for your health issue’. But is it in any way ‘illegal’ to do all of that without the pretence that you’re a doctor? I’ve never heard it is, nor imagine it is. If so, how can making no pretence to be a financial advisor/expert/professional, while offering advice based on a financial history, AND not asking for any payment or benefit in doing so, be ‘illegal’? I can’t imagine the rule makers think the community should be better protected against financial mal-treatment than personal health mal-treatment.

[TUK020]

I’m a long way from knowing the FCA rules etc, but….
It’s ‘illegal’ in the sense of punishably wrong to pretend to be a doctor, take a medical history from a person, feel their pulse, look at their tongue and measure their blood pressure, and go on to say ‘you’re ok’ or ‘do this for your health issue’. But is it in any way ‘illegal’ to do all of that without the pretence that you’re a doctor? I’ve never heard it is, nor imagine it is. If so, how can making no pretence to be a financial advisor/expert/professional, while offering advice based on a financial history, AND not asking for any payment or benefit in doing so, be ‘illegal’? I can’t imagine the rule makers think the community should be better protected against financial mal-treatment than personal health mal-treatment.

Why are you assuming that there would be any overlap between government financial legislation and common sense?

[MDW1954]

Well, no. Because the site's rules are very explicit on that:

Users should note that absolutely no discussions regarding finance or investments should be given or taken as 'advice', and is given and received only as the personal opinions of the posters themselves.

But this is just usual bum covering legal clause to protect the site. I see posters clearly asking for advice and being provided with it on a daily basis. You can call it an opinion but would it stand up in court? Interesting you missed out the first part of that rule:

Any views expressed herein remain the responsibility of the user posting the views. LemonFool takes no responsibility for the content posted by its members.

The best way is to say "If it were me, I would do so-and-so", or something similar. Qualified with "It's up to you to decide what to do". If people suggest that the OP considers alternative options, that is merely discussion between peers. As I see it, giving advice is telling the OP to buy so and so, or to sell something. Discussing alternatives is definitely not.

TJH

It depends on what the so-and-so is but you're right. Most of the discussions on this site are what the FCA would consider as guidance, which is fine, anyone can provide guidance. However, as soon as you instruct someone to buy or sell an investment you are unequivocally providing advice and if you are not an FCA authorised adviser you have crossed the line and broken FCA regulations. Apart from the sheer arrogance and lack of empathy for the OP displayed in the post, this is what I was objecting to. It's a total no go - you cannot tell anyone to buy or sell an investment regardless of the rules of this site. The FCA definition of what constitutes advice is very clear.

All the best, Si

Simoan,

See the first piece of text, highlighted in red. What on earth did you think that user bagger46 actually did say? Precisely that: "if it were me, this is what I would do..." A construction that you say is correct, in other words, and which constitutes guidance.

See the second piece of text highlighted in red. As we have already seen, and as has already been pointed out to you, bagger46 did NOT instruct the OP to sell. He simply stated that if he held that particular portfolio, he would sell it. Do not continue to say that he did: the facts are otherwise.

Bagger46 has now departed the site, and will be missed.

MDW1954

[SebsCat]

Quite apart from the whole "guidance" vs "advice" debate, you only need FCA regulation to provide advice if you are doing it "by way of business". Which is just common sense since otherwise you would be breaking the law if you advised a relative!

The relevant legislation is section 22 of the Financial Services and Markets Act 2000, https://www.legislation.gov.uk/ukpga/2000/8/section/22

22[F1Regulated activities]

(1)An activity is a regulated activity for the purposes of this Act if it is an activity of a specified kind which is carried on by way of business and—

(a)relates to an investment of a specified kind; or

(b)in the case of an activity of a kind which is also specified for the purposes of this paragraph, is carried on in relation to property of any kind.

(there's more to the section but that's the bit that covers investment advice)

There's further guidance in the FCA handbook, https://www.handbook.fca.org.uk/handbook/PERG/14/5.html

[Dod101]

Well, no. Because the site's rules are very explicit on that:

Users should note that absolutely no discussions regarding finance or investments should be given or taken as 'advice', and is given and received only as the personal opinions of the posters themselves.

But this is just usual bum covering legal clause to protect the site. I see posters clearly asking for advice and being provided with it on a daily basis. You can call it an opinion but would it stand up in court? Interesting you missed out the first part of that rule:

Any views expressed herein remain the responsibility of the user posting the views. LemonFool takes no responsibility for the content posted by its members.

The best way is to say "If it were me, I would do so-and-so", or something similar. Qualified with "It's up to you to decide what to do". If people suggest that the OP considers alternative options, that is merely discussion between peers. As I see it, giving advice is telling the OP to buy so and so, or to sell something. Discussing alternatives is definitely not.

TJH

It depends on what the so-and-so is but you're right. Most of the discussions on this site are what the FCA would consider as guidance, which is fine, anyone can provide guidance. However, as soon as you instruct someone to buy or sell an investment you are unequivocally providing advice and if you are not an FCA authorised adviser you have crossed the line and broken FCA regulations. Apart from the sheer arrogance and lack of empathy for the OP displayed in the post, this is what I was objecting to. It's a total no go - you cannot tell anyone to buy or sell an investment regardless of the rules of this site. The FCA definition of what constitutes advice is very clear.

All the best, Si

Simoan,

See the first piece of text, highlighted in red. What on earth did you think that user bagger46 actually did say? Precisely that: "if it were me, this is what I would do..." A construction that you say is correct, in other words, and which constitutes guidance.

See the second piece of text highlighted in red. As we have already seen, and as has already been pointed out to you, bagger46 did NOT instruct the OP to sell. He simply stated that if he held that particular portfolio, he would sell it. Do not continue to say that he did: the facts are otherwise.

Bagger46 has now departed the site, and will be missed.

MDW1954

I am with you on this MDW but I would not even say that Bagger provided 'guidance'. Simply expressing his opinion, which we all do from time to time. In fact that is surely what this site and others like it are about, exchanging opinions. I doubt very much that even the most naive would 'take instructions' from this site anyway.

Dod

[OhNoNotimAgain]

It is always a huge shame to lose posters who just get on with things and are successful at it. We can all learn from posters like you.

Dod

History does not support that statement.

I have no idea what you mean and frankly it does not matter much anyway. We are all just names of people who care to post on a website with no idea who or what is behind them, signifying nothing.

Dod

You don't really believe that do you?
Have you not seen some of the comments from GS or Lootman?

[ukmtk]

Many thanks to all the non-advice received.
I took no notice of it.
It was a purely coincidental that I sold my CLI holding.
I bought more VHYL.
I also started buying the ITs AEI & HHI.
The link to the AIC website https://www.theaic.co.uk/ was very useful.

[monabri]

Many thanks to all the non-advice received.
I took no notice of it.
It was a purely coincidental that I sold my CLI holding.
I bought more VHYL.
I also started buying the ITs AEI & HHI.
The link to the AIC website https://www.theaic.co.uk/ was very useful.

Although some overlap, AEI & HHI seem to jointly spread the net over a wide basket of UK shares.

From the latest company factsheets

https://www.hl.co.uk/shares/shares-sear ... rd-gbp0.25
https://www.hl.co.uk/shares/shares-sear ... d-5p-share

(Company, percentage holding)

Aberdeen Equity
BP 6.1
Shell 5.0
Glencore 3.9
Thungela Resources 3.8
Diversified Energy 3.2
Imperial Brands 3.1
SSE 2.9
British American Tobacco 2.9
Natwest 2.8
Barclays 2.7
National Grid 2.7

Henderson High Income
British American Tobacco 5.0
Unilever 3.7
RELX 2.9
Diageo 2.8
AstraZeneca 2.8
BP 2.6
NatWest Group 2.6
Imperial Brands 2.5
Anglo American 2.3
3i Group 2.2

[yieldhog]

Several comments on this board have mentioned that it’s been a good year for dividends and my SIPP portfolio is no exception. Dividend income for 2022 was just over 30% up on 2021, a record level in the 15- years or so that I’ve been actively managing this portfolio. Dividend yield on the portfolio was 6.64%. As of today, the capital value of the fund is just 1- 2% above where it was at the start of the year and my drawdown rate for 2022 was 3.70%. During the year the portfolio reached a record high but has dropped back about 2-3% since then. Dividend income has always exceeded my fixed drawdown amount. In the last ten years, the lowest excess was 24% (2016) and the highest this year 79%.
My wife and I are in our mid-seventies, so the SIPP is structured towards income but with a growth element to enable us to increase the income level in the future if it’s needed. I’m in the process of trying to simplify the portfolio and reduce risk without sacrificing income generation. For the past couple of years I’ve been selling single company risk elements in favour of buying ITs and ETFs. Here’s where I am right now:

Fixed Income Individual Issues
GACA 8.875 Cum Pref
GACB 7.875 Cum Pref
MBSP 6.75 PIBS
SANB Pref

High Yield Fixed Income
NCYF
VSL

Large Cap UK Equities
AEI
BATS
IUKD
IMB
LGEN
MNG
PHNX
World ITs and ETFs

APAX (Global Alpha)
HFEL (Far East)
HINT (Non-UK Equity Income)
IAT (Asia x-Japan Equity Income)
IAPD (Asia)
JEGI (Europe G+I)
JGGI (Global G+I}
NAIT (North America)

Natural Resources
BERI (Energy and Resources)
BWRM (World Mining and Metals)

Small Cap And VC
BVT

Speculative Equities
BDEV, BWY, CMCX, ITV, POLY

Total number of positions is 29. Allocations are not equal, and no position is more than 6% of the portfolio.
The top ten contributors to dividend income in descending order are: NCYF, IMPS, BRWM, BATS, BVT, HFEL, AEI, PHNX, MNG, IUKD.
On the agenda for next year is to continue to simplify.
BVT has become very illiquid. I have sold half and will sell the other half early next year. The money will go into other existing positions.
I’d like to sell my remaining holding in MBSP. After holding them for several years without getting interest payments I eventually sold half my holding last year at about four times what they cost me. I would be giving up a running yield of close to 7.5% but it might be worth it to buy something more liquid and better quality.
One issue I am wary about is the use of leverage in most ITs. I’m not against leverage but it can have a devastating effect on a fund’s value if it becomes a forced seller in a bad market situation. With interest rates rising and the likelihood of more bankruptcies next year it’s going to be critical for leveraged funds to have reliable financing available. I prefer low or unleveraged funds like IUKD.
In the Natural Resources sector BRWM and BERI have had a great run and I have already taken some profits. I wonder if we have seen the best in this cycle and I may take some more profits. The yields are no longer that good and I can move the proceeds somewhere else to improve the overall SIPP dividend yield.
APAX is an interesting one, but the yield has been a bit disappointing. However, it diversifies my SIPP into a sector that may produce some better returns next year. It’s not leveraged and at such a whopping discount to NAV (29%) I’ll probably leave it for now.
The speculative stocks in my list are small positions that I think have some good potential for capital gains. POLY was a bet on Russia not invading Ukraine and, clearly, I lost that bet, but there is still hope for the company even if it takes a few years. ITV was a bet on new management extracting better value from this company and I believe it is on track to do so. While waiting for that, the yield is not too bad. I was probably a bit early to get into BDEV and BWY but again I believe they will come good in a year or two and the yields will probably be reasonable. CMCX was a bet on consolidation in the broker sector and hence the prospect of a bid for CMCX. No sign of that at the moment so I might sell it.
With my weightings the prospective dividend yield for next year looks like 6.94% at my book prices but only 6.47% at current prices. I’d like to see the current yield back up to nearer 7%. One IT I’d like to buy to help get the yield up is SMIF, but my broker (ii) doesn’t allow retail buying of that issue.
More fundamentally, setting all this information out is making me ask myself “Am I making my life too complicated by managing my SIPP the way I do and, if so, can I make it radically simpler without significantly undermining the results that I have been achieving for more than fifteen years”.
If the answer to that is “Yes” then what’s the alternative?
To take one simple alternative, I compared the results of my SIPP for 2022 with an investment in just two ETFs, IUKD and IAPD, both of which I already own in the portfolio.
On a very basic level, this is what it looks like:
SIPP Total Return YTD 0.70%
IUKD Total Return YTD -1.79%
SIPP Dividend Return 6.64%
IUKD Dividend Return 5.90%
IAPD Total Return -4.34%
IAPD Dividend Return 7.11%
SIPP Drawdown 3.70%

In summary, taking a 50/50 split of IUKD and IAPD, produced a dividend return of about 6.50%, only slightly below the SIPP dividend return but well above the SIPP drawdown rate of 3.70%.
As to whether this is the way forward for me, I will need to do an analysis over a longer time period to see if a longer history produces a similar picture. But it’s certainly food for thought.
There are several considerations that are unique to my situation as well as the more general considerations that would apply to anyone else thinking along these lines. Has anyone else been thinking of drastically simplifying a SIPP portfolio or already done so for whatever reason? If so, I would be grateful if you could share your thoughts/experience with me.
Best wishes and happy holidays to all TLF watchers/posters.
Y

[moorfield]

Has anyone else been thinking of drastically simplifying a SIPP portfolio or already done so for whatever reason? If so, I would be grateful if you could share your thoughts/experience with me.

I am about 25 years behind you(!) and within the next few years expect to be in a similar position where my SIPP dividend income will exceed my drawdown target, the higher rate income tax threshold. I have been overhauling my portfolio this year from HYPish shares into income oriented ITs, chiefly because I want diversification from FTSE across AIC sectors and regions and steady income streams, and to reduce the risk of me cocking up individual share selections of which I have collected a bingo card full over the last decade. This is a work in progress currently coalescing around these 14 with perhaps 2 more to add from BRWM, BBOX, VIP, VSL, HINT, MCT. I don't plan to hold more than 16ish.

EAT
NCYF
HFEL
SMIF
CSH
APAX
AEI
CHI
HHI
THRL
FSFL
JLEN
SOI
MYI

[scotview]

I bought more VHYL.

I see that the November yield was 3.8%. Bloomberg commentators seem to be gloomy about US/EU/UK earnings but quite positive re China possibly emerging from lockdowns.

In that context do you think it deserves parting with some cash just now for VHYL.

Thanks.

[yieldhog]

ukmtk

VHYL Decent yield for such high quality, non-leveraged and low-management fee ETF. Note it has just gone xd (16th) and is trading near the top of it's historical price range. Dividends are reported in dollars; does it have an option to be paid in pounds?

I have looked at this and other Vanguard funds which I have long admired for value and simplicity. I will be taking a fresh look in the New Year to see if any of the Vangard family of funds fit into my strategy.

Thanks for posting.
Y

[yieldhog]

moorfield:
Interesting mix of funds.

I have held several in the past and still hold several others.

I swapped my EAT for JEGI because I liked the JEGI portfolio better and it has full dividend cover. Obviously a big yield advantage for EAT because it boosts yield by paying back some capital. I'm not against that approach but will do some more research to see how my switch has worked out. At the end of the day it may be down to a preference for one portfolio over the other. Leverage may also be a factor, EAT being quite low compared with JEGI's moderate level.

I mentioned SMIF in my post because of not being able to buy through Interactive Investors (ii). Which boker did you use to buy? It's a good fund and I would like to buy some.

I've also owned MYI and SOI in the past but swapped for reasons that made sense at the time. Both are good funds so I will re-evaluate my decisions to see whether or not I should switch back.

I'm not familiar with some of the other funds you hold but will certainly take a closer look to see if they fit with my strategy.

Thanks for posing.
Y

[moorfield]

I mentioned SMIF in my post because of not being able to buy through Interactive Investors (ii). Which boker did you use to buy? It's a good fund and I would like to buy some.

AJ Bell

[yieldhog]

moorfield,
Thanks for latest post.

Regarding the portfolio list you mentioned earlier, following are my comments:

CSH Social Housing Company. 48% discount, 9.65% yld, 47% down last 5-yrs, 150% geared, Divi not covered, target of short selling. Despite all that it has some solid financing in place and may be able to withstand the short selling pressure. A cut in the dividend would probably help to conserve cash. Too risky for me right now.

CHI Large cap UK Equity Income. Yld 6.57%. I compared this with my AEI holding and on balance prefer AEI but it's certainly a decent alternative. Apart from a slightly lower yield, CHI also has lower and more erratic divi cover than AEI.

HHI Similar to CHI but an even lower yield (6.16%)

THRL Healthcare REIT. High gearing (131%), Divi not covered, 27% discount to NAV, 8.88% yield. I've been out of REITs for a few years now although the healthcare sector and social housing appear to have some tempting offerings but may be too politically vulnerable.

FSFL Solar fund. I like this one. 6.07% yld, no gearing, 8.05% discount to NAV, good cover. I may replace some of my BERI with this.

JLEN Environmental Assets. 5.68% yld, small discount, not geared, erratic but decent cover. Overall, looks okay.

SOI and MYI Both good funds and well-managed but just not tempting for me at these levels.
Thanks again for an interesting and relevant post.

Y

[monabri]

I mentioned SMIF in my post because of not being able to buy through Interactive Investors (ii). Which boker did you use to buy? It's a good fund and I would like to buy some.

AJ Bell

I think SMIF is classified as "foreign income"...the ISIN ( GG00BJVDZ946) indicates Guernsey and , further investigation, from the factsheet found here

https://www.hl.co.uk/shares/shares-sear ... ncome-fund

"TwentyFour Select Monthly Income Fund is managed by TwentyFour Asset Management LLP and is a non-cellular company limited by shares incorporated in Guernsey and registered as a closed-ended collective investment scheme with the Guernsey Financial Services Commission. "

Not an issue if held in an ISA but might be a consideration if not.

Edit. Just checked ...the sister fund, TFIF (GG00B90J5Z95) is definitely classed as " Overseas Income".

[monabri]

Addendum

Other foreign income

NYCF ( Jersey)
FSFL ( Jersey)
JLEN ( Guernsey)
SEQI ( Guernsey)
BIPS ( Jersey)

[mc2fool]

I mentioned SMIF in my post because of not being able to buy through Interactive Investors (ii). Which boker did you use to buy? It's a good fund and I would like to buy some.

AJ Bell

I think SMIF is classified as "foreign income"...the ISIN ( GG00BJVDZ946) indicates Guernsey and , further investigation, from the factsheet found here

https://www.hl.co.uk/shares/shares-sear ... ncome-fund

"TwentyFour Select Monthly Income Fund is managed by TwentyFour Asset Management LLP and is a non-cellular company limited by shares incorporated in Guernsey and registered as a closed-ended collective investment scheme with the Guernsey Financial Services Commission. "

Not an issue if held in an ISA but might be a consideration if not.

Edit. Just checked ...the sister fund, TFIF (GG00B90J5Z95) is definitely classed as " Overseas Income".

I can buy SMIF with Interactive Investor, no problem ... well, I can go through the order process to the point where it says the market is currently closed and I can place the order for execution "at market best" on Monday at least (I declined).

Being classed as "foreign income" in itself has nothing to do with whether you can trade an IT/IC or not and, if held outside of a tax shelter, it makes no difference to your income taxes other than having to put it in a separate box in your self assessment.