RE: Results review17 Aug 2023 11:18
"Mecon, interesting comment, i wonder if a balanced portfolio of individual shares glao vod tesco lgen aviva uk wind etc would be better or worse than a fund. Ive found it very difficult to find a high yield that would beat an average 8pc div rising set of shares fundsmith seems bit risky. Need a fund that gives circa 8pc div, gently rising price over time, rising divis, so a proper return over inflation achieved."
I'm approaching the "decumulation" phase of life and have split my portfolio in half.
Half is split between 10 dividend paying shares where I understand the business they're in; have faith in the management teams; confidence that they'll be around in 10 years time and a strong belief that they're undervalued in the current market cycle. I won't touch companies where debt servicing is a concern or where I've worked in/with a company and found them to be a disorganised shambles.
The other half is invested in funds and investment trusts that I believe will outperform long term. Most, but not all tech.
Prior to reshaping this I'd done really VERY well out of being 100% in tech and international funds. But I believe that the economic landscape has shifted enough that that approach is more risky than my current tolerance. Having seen my portfolio drop 35% in value at one point highlighted the importance of managing sequence of returns risk.
There is also a strong psychological factor here. I overpaid my mortgage when mortgage rates were low and when "the smart money" would have put that overpayment into investments. But I was already putting a lot into investments. And, at the point where I found myself hating my job, I was able to walk away because I was living in a house that I own outright. I know me - I wouldn't have done that if I'd had the mortgage and the money to pay it off invested separately.
The dividend shares I have will pay out twice the retirement income I need. So that gives me a lot of headroom for individual company failure; economic shocks and dividend reinvestment for income growth. Wrongly, I'm ignoring the capital value of those dividend shares and treating it as an annuity with (my view of) a floor capital valuation.
Zac, who writes a lot of sense, would point out that I should look at the total return and fund my income through selling units. But I'd find that psychologically difficult. What's more important for me is (relative) certainty of income and not becoming a distressed seller of funds to fund my living costs.
Check back with me in 5-10 years to see whether I'm a mis-guided fool or that sensible chap you wish you'd listened to
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