The Lemon Fool

I'm attempting to build up a portfolio of ITs within an ISA to supplement the regular payments from a DB pension, where the pension will be the greatest proportion of my retirement income.

To date I've been exclusively buying 8 ITs based on L'Uni's TMF baskets and am pleased with them overall.

As part of my new tax year review, I am pondering three questions and would seek the views of others to add to my research:

1. Is it time to diversify rather than further add to the 8 income and growth equity based ITs?

2. If so, taking current market conditions into account, would REITs or Bond ITs be preferable this year (perhaps switching the choice in 12 months)?

3A. If REITs, which ones (am currently tracking TR Property, Standard Life Property Income, F&C UK Real Estate)
3B. If Bond ITs, which ones (am currently tracking Invesco Perpetual Enhanced Income, Henderson Divesified Income, New City High Yield) or would an ETF like iS15 be a better choice?

I'm looking for LTBH positions, so something with legs over the course is preferred. As ever, I'm happily doing my own research, but also as ever, keen to solicit the views of others.

BrummieDave wrote:I'm attempting to build up a portfolio of ITs within an ISA to supplement the regular payments from a DB pension, where the pension will be the greatest proportion of my retirement income.

To date I've been exclusively buying 8 ITs based on L'Uni's TMF baskets and am pleased with them overall.

As part of my new tax year review, I am pondering three questions and would seek the views of others to add to my research:

1. Is it time to diversify rather than further add to the 8 income and growth equity based ITs?

2. If so, taking current market conditions into account, would REITs or Bond ITs be preferable this year (perhaps switching the choice in 12 months)?

3A. If REITs, which ones (am currently tracking TR Property, Standard Life Property Income, F&C UK Real Estate)
3B. If Bond ITs, which ones (am currently tracking Invesco Perpetual Enhanced Income, Henderson Divesified Income, New City High Yield) or would an ETF like iS15 be a better choice?

I'm looking for LTBH positions, so something with legs over the course is preferred. As ever, I'm happily doing my own research, but also as ever, keen to solicit the views of others.

What IT's do you currently hold?

Raptor.

BrummieDave wrote:To date I've been exclusively buying 8 ITs based on L'Uni's TMF baskets and am pleased with them overall.

It'd be useful if you said which 8 ITs, 'cos if you are talking about Luni's "B8" then the most obvious diversification would be to add some international exposure.

3A. If REITs, which ones (am currently tracking TR Property, Standard Life Property Income, F&C UK Real Estate)

None of those are REITs. They are Property Investment Companies.

TR Property is a UK domiciled property securities investment company, i.e. it (mostly) invests in property companies rather than in property itself (although IIRC it does have a small % in some actual bricks and mortar.)

Standard Life Property Income and F&C UK Real Estate are both offshore (Guernsey) domiciled direct UK property investment companies, i.e. they own and operate actual buildings in the UK.

The difference between UK Real Estate Investment Trusts (REITs) and those is mostly tax, see http://www.property-guide.reita.org/sub ... p?ss_id=25

I went for L'uni's B7a which I took to have lower current yield, higher likely growth rate, and lower overall risk compared to the B8, so it's PLI, BNKR, FCI, JCH, LWI, MRC, MYI and CTY (the last because I like it!). So mostly domestic, with limited international exposure.

And thanks mc2fool, you're already educating me!

mc2fool wrote:The difference between UK Real Estate Investment Trusts (REITs) and those is mostly tax

If held in an ISA, tax is largely irrelevant.

Typical REITs are also in the business of commercial or industrial property development and redevelopment as well as being buy and hold investors for the rental stream.

Alaric wrote:

mc2fool wrote:The difference between UK Real Estate Investment Trusts (REITs) and those is mostly tax

If held in an ISA, tax is largely irrelevant.

REITs & Property Investment Companies can't hold their buildings and investments in ISAs .

It's not only investors that (potentially) pay taxes.

BrummieDave wrote:I went for L'uni's B7a which I took to have lower current yield, higher likely growth rate, and lower overall risk compared to the B8, so it's PLI, BNKR, FCI, JCH, LWI, MRC, MYI and CTY (the last because I like it!). So mostly domestic, with limited international exposure.

BD,
Did you mean MRC (Mercantile) or MRCH (Merchants)?

Alaric wrote:

mc2fool wrote:The difference between UK Real Estate Investment Trusts (REITs) and those is mostly tax

If held in an ISA, tax is largely irrelevant.

Not quite. REIT's are not subject to corporation tax, so there can be a tax saving there, as otherwise there is nothing that an individual investor can do to mitigate corporation tax on his investments. Indeed, it is precisely because they don't pay corporation tax that explains why they are taxed differently from other shares.

richfool wrote:

BrummieDave wrote:I went for L'uni's B7a which I took to have lower current yield, higher likely growth rate, and lower overall risk compared to the B8, so it's PLI, BNKR, FCI, JCH, LWI, MRC, MYI and CTY (the last because I like it!). So mostly domestic, with limited international exposure.

BD,
Did you mean MRC (Mercantile) or MRCH (Merchants)?

If it's Luni's B7, pretty sure it is MRC.

MRCH featured in the higher yield but lower growth B8 IIRC

Staffordian

I hold MRC (as typed) - Staffordian is right, L'Uni had MRCH is the higher yielding B8

Are we getting bogged down in the detail here folks; more B7 (or other suggestions for equity based ITs), Bond ITs, or REITs?

Looking forward to suggestions (to complement my own research) with associated reasons please.

BrummieDave wrote:Are we getting bogged down in the detail here folks; more B7 (or other suggestions for equity based ITs), Bond ITs, or REITs?

Perhaps diversify gradually into one of each, with a bit more international spread, to see how they behave.

HSTN Hansteen is doing quite well as an REIT.
NCYF CQS New City High Yield Fund is a good bond substitute and might hedge a bit against the current uncertainties.
HFEL Henderson Far East Income or SOI Schroder Oriental Income could give you some Asia Pacific exposure.

As always, DYOR.

Tramrider

You could also go for more Global G&I's like: JPGI and HINT (HINT exc's the UK), as well as MYI (previously mentioned).

Or private equity such as SLPE (Standard Life Private Equity) - (targeting 4% yield).

Or JLEN (John Laing Environmental Assets) - 5.5% yield.

I hold all the above.

I suppose you could buy an ETF invested in TIPS which are like Index-Linked Gilts but happen to offer a higher real return. But that's compared to US inflation, of course, not ours. It would be investing in insurance in case a high inflation rate in future was not matched by a high dividend growth rate.

I am assessing a portfolio of trusts for myself and in the list of my current thinking are some AIC global funds over and above those in the B7 or B8, regulars on this forum and so would offer you diversification from UK centred trusts. The idea is not to buy all of them of course but the most appropriate.
I don't have a spreadsheet ranking system yet but I do keep a qualitative reminder of why these trusts appear in my unsorted list and watchlist in the http://www.theaic.co.uk site.

My attractions of the trust - (growth g) (yield y) (charges c) (AIC dividend heroes d)
where charges means ongoing charges are less than 1.1% but usually much lower, whilst growth is total return growth at 5 & 10 years.
Since discount on some of these trusts changes regularly I have not added this into my tracking yet but would consider before I would press the button to buy and it is updated in my watchlist.

Scottish Mortgage Investment Trust (SMT)(c,g,d), Witan (WTAN)(g,d), Foreign & Colonial Investment Trust (FRCL)(g,y,d), Alliaince Trust (ATST)(c,g,y,d), Monks (MNKS)(c,g)

I am interested in a bit of total return to either collect dividends to feed me & my HYP or just grow for a rainy day.


midgesgalore