Investment Trust Dividends
Now the NESF dividend has been announced the income earned for the first quarter of 2026 should be £3,641.00
The total for the year should be around £10,769.00.
There should be income from the dividends, as they are re-invested and also a contribution from VPC, which is a known unknown and should act as a buffer for the 2026 target of 10k.
IF the snowball earns £10,505.11, it will put the SNOWBALL several years ahead of the plan.
Next energy have announced their dividend target for year ending 31 Mar 2026
IF they pay the same dividend next year and you add 2.11p the total dividends could be 10.54p.
The current share price is 51p, if you buy before the xd date next week and IF they hold the dividend and don’t cut it, the yield would be 20% for holding just over a year.
The Board reconfirms the Company’s full-year dividend target guidance for the year ending 31 March 2026 remains unchanged at 8.43p per Ordinary Share (31 March 2025: 8.43p). | |
| · | Dividend cover for the full-year is forecast to be covered in a range of 1.1x – 1.3x by earnings post-debt amortisation. |
NextEnergy Solar Fund Limited
Third Interim Dividend Declaration
NextEnergy Solar Fund, a leading specialist investor in solar energy and energy storage, is pleased to announce its third interim dividend of 2.11p per Ordinary Share for the quarter ended 31 December 2025, in line with its previously stated target of paying dividends of 8.43p for the year ending 31 March 2026.
The third interim dividend of 2.11p per Ordinary Share will be paid on 31 March 2026 to Ordinary Shareholders on the register as at the close of business on 13 February 2026. The ex-dividend date is 12 February 2026.
Kyle Caldwell explains how you can build your own portfolio to provide regular income.
27th January 2026
by Kyle Caldwell from interactive investor
Since the pension freedoms were introduced in April 2015, it’s become increasingly common for individuals to use their pension to pay themselves an income in retirement.
For most people, the aim will be to secure a reliable and regular income from their investments, with the intention of not inflicting too much harm on the capital.
The good news is that for those who arrange their investments carefully, a monthly income can be achieved. There are several ways to go about this, as we explain below.
First some groundwork needs to be done. The starting point is to calculate what your existing provision will provide, and then compare this against what you need.
To calculate how much income you need to generate, factor in the state pension (if you are at an age where you can claim it), as well as any other assets that can be drawn on in retirement, such as ISAs and, for those who have them, defined benefit pensions.
Once you’ve done all the sums, you can work out the size of your income gap, which will determine the return you need to generate.
How much income you need/would like is a personal decision, depending heavily on lifestyle. However, ‘The Retirement Living Standards’ from Pensions UK are often cited. The calculations show someone living alone would need a pension pot of around £540,000 to £800,000 for a ‘comfortable’ retirement. For couples, the amount would be £300,000 to £460,000 per person.
Bear in mind that this is only an illustration, makes a host of assumptions, and is based on a single person buying an annuity. The figures shown are after tax, so the true amounts would be higher to meet the standards.
It could be that your pot is too small to achieve the target you have in mind, or that it requires stomaching a higher amount of risk than you are comfortable with.
For example, to generate income of £20,000 a year, a pot size of £400,000 would require an investment return of 5%. For larger sums, the dividend yield target would be lower, at 4.5% for £450,000 and 4% for £500,000.
Another thing to bear in mind is that the sooner you retire, the longer you will need your pension pot to stretch to last the course (assuming you choose income drawdown). There’s always the risk of draining your pension too soon if the investments underperform and if withdrawals are overly aggressive.
Another thing to consider is whether to use some of your pot to buy an annuity, which will provide guaranteed income for life. However, bear in mind the amount of income annuities offer tends to become more attractive the older you get. Moreover, buying an annuity is an irreversible decision.
Keeping your money invested at retirement provides more flexibility in terms of how much to withdraw and for estate planning. However, from next April, unspent pension funds will come under the inheritance tax net for the first time following a rule change by the government.
It is also worth remembering that choosing to remain invested at retirement or opting to buy an annuity is not a binary decision – you can do both. You could look to secure a guaranteed income through an annuity to cover a certain amount of expenditure, and then keep the rest invested to take flexibly.
There are various ways to arrange investments to pay yourself an income at retirement, with the most obvious being to focus primarily on income-generating assets.
To reduce risk, which is particularly important in retirement, one approach is to draw only the income produced by the underlying investments held in professionally managed funds and investment trusts (the “natural yield”), rather than eating into capital growth.
This is because in a scenario where stock markets fall sharply and income withdrawals are maintained or increased, it is difficult for a retirement fund’s capital value to recover after.
That’s particularly the case if you’re drawing on capital to maintain the required level of income when the market falls (as opposed to taking only the “natural” yield), since reducing the number of fund units you own makes it much harder for the fund to regain value.
For those who continue to draw income from a pension pot at that stage, a vicious cycle is created, resulting in the number of units and value of investments reducing further. The phenomenon is known as pound-cost ravaging, and in the worst-case scenario, this potentially means the pension pot running out before you die.
As a rule of thumb, withdrawing 4% a year is potentially considered a safe withdrawal rate. The theory is that by taking this percentage as an income, adjusted annually to account for inflation, retirement pots will potentially last 30 years or more.
However, this rule by no means offers cast-iron certainty. There are many unknown future variables that can impact whether 4% withdrawals will avoid draining your portfolio too soon.
Chief among the problems of this strategy is that investment performance is impossible to accurately predict. If your portfolio gets off to a bad start, continuing to draw 4% could mean your pot drains quicker than planned.
That said, 4% a year isn’t an overly aggressive withdrawal rate. It can certainly be a good starting point, so long as you annually review where you are to make sure any withdrawals are sustainable.
The 4% rule was devised by US financial planner Bill Bengen in 1994. Bengen backtested a portfolio of 50% in US equities and 50% in US bonds over 30-year rolling periods from 1926. He found that withdrawing 4% a year, increasing it in line with inflation, would see the pot size last at least 30 years.
Bengen recently published new research that examined whether investors with a more diversified portfolio, containing seven asset classes rather than just shares and bonds, could be more adventurous with how much they withdraw.
This new research (30 years on from the original analysis) suggested that 4.7% is the new safe withdrawal rate. We took a deep dive into this new research in an On The Money podcast episode, which you can watch/listen to here.
However, bear in mind that this isn’t financial advice and is only intended to be food for thought. Ultimately, how much money to withdraw is a personal decision and everyone in retirement has their own set of unique circumstances.
It’s important to regularly review the amount you’re withdrawing to check that it fits with the things you want to do in retirement, and to examine how the investments are performing.
Having a cash buffer is one way to give a pension portfolio ample time and opportunity to recover.
The idea is to keep roughly two or three years’ worth of expenditure in cash. If a notable stock market slump occurs, withdrawals from your investments can be paused and the cash bucket utilised. This gives the pension portfolio a better chance of recovering because money hasn’t been taken out of it.
If possible, top up the cash, so that you are protected again if further sizeable market falls happen in future.
This cash could be held in a money market fund, which invests in high-quality bonds that are due to mature soon, meaning that investors can get a modest income without taking much investment risk.
In interactive investor’s latest ii Top 50 Fund Index, six money market funds appear in the ranking of the 50 most-bought funds, investment trusts and ETFs in the fourth quarter of 2025.
They are Royal London Short Term Money Market (accumulating)
Royal London Short Term Money Market (distributing)
Amundi Smart Overnight Ret GBP H ETF Acc CSH2
Fidelity Cash Fund, Legal & General Cash Trust and Vanguard Sterling Short-Term Money Market.
Let’s now move on to the different types of fund options to consider, as part of your wider research, on a post-retirement portfolio.
The hassle-free route is to focus solely on funds paying a monthly income. Around a decade ago there were only around a couple of dozen funds paying out monthly, but now there’s more than 150.
The downside is that there’s only a small number that solely invest in equities. Most monthly income funds invest in bonds or adopt a multi-asset approach, which means investing in both shares and bonds. For those in retirement, a balanced approach such as this helps to both protect and grow capital.
Bear in mind that some monthly income funds invest solely in, or have big weightings to, high-yield bonds, which is the risker end of the bond market.
With monthly income funds, the amount of income generated is based on the dividends or coupons that the underlying holdings have paid each month. Therefore, the income can vary, but to counteract this, most funds smooth the dividend payments into 12 equal amounts, holding back some income in good months, which is then used to top up leaner periods. Any excess cash left over at the end of the year is handed back to investors.
Two funds endorsed by our fund analyst team that provide monthly income are Man Income and Artemis Monthly Distribution.
Man Income, which has a current yield (as at 23 January 2026) of 4.3%, invests in UK stocks with above-average dividend yields.
Artemis Monthly Distribution, a multi-asset fund, invests around 60% in bonds and 40% in shares, and has a yield of 3.6%.
However, it’s prudent to avoid betting the house on income strategies. Given that average life expectancies are in the mid 80s, a pension portfolio also needs exposure to growth-producing assets to strike an appropriate balance.
Having exposure to growth strategies will help give your portfolio greater diversification, and it also reduces exposure to bonds, assuming you can tolerate the higher volatility associated with shares.
Most income funds tend to aim to generate capital growth, as well as income. However, some put more focus on income generation. As ever, it’s a case of looking under the bonnet to find out which approach is being taken.
an investment trust that has raised its dividend every year since 1966, aims to deliver a mixture of growth and income. Since 1991, it’s been managed by Job Curtis, who focuses on dependable dividend payers in the FTSE 100 index. It is regarded as a ‘Steady Eddie’ due to its conservative approach and its yield is currently 3.9%.
Another fund endorsed by our fund analyst team is Artemis Income, which also focuses on UK companies producing excess cash to sustainably pay dividends.
However, there’s a potential downside if you opt for the convenience of taking a regular income from income-producing investments, as those who buy funds focusing more on capital growth could benefit from higher overall total returns.
Yet adopting this approach means the income would need to be achieved by selling fund units rather than relying on income generated from the underlying investments in the fund.
Selecting funds or investment trusts just because they pay income out in a particular month shouldn’t be the main reason you buy those investments.
Given that most funds and trusts pay quarterly or twice a year, you could manually spread the income produced into regular payments throughout the year. Not focusing solely on when dividends are paid or monthly income funds gives you a much bigger pool to fish in.
One way to achieve a mix of growth and income is to consider investment trusts. As seasoned investors can testify, the investment trust structure can work very well for investors looking for a regular income stream.
This is because one of the advantages of investment trusts is their ability to squirrel away income for a rainy day. Up to 15% of income generated each year from underlying investments can be saved, in what is called revenue reserves. In contrast, funds have to distribute all the income generated by the underlying investments each year.
When there’s a period when income from underlying investments dries up, which happened during the Covid-19 pandemic and the financial crisis, investment trust boards can utilise those reserves and top up shortfalls.
This is why there are an impressive number of “dividend hero” investment trusts, which have raised their dividends year in, year out, for long periods.
Ten dividend heroes – City of London Ord CTY
Caledonia Investments Ord CLDN0
The Global Smaller Companies Trust Ord GSCT0
F&C Investment Trust Ord FCIT0.
have consistently increased payouts for more than 50 years.
Bear in mind that for some dividend heroes, the dividend yield is fairly low, which reflects the trusts’ broad emphasis on growing the capital and raising the payout, rather than offering a high level of income. Also, in the case of Murray Income, it’s worth noting that the trust’s management firm is set to change from Aberdeen to Artemis.
For those who are happy to prioritise income and are seeking a high income of over 6%, there are fewer options, and they are more adventurous.
For equities, you could consider the small number of funds that artificially boost their dividend yields through a special technique that involves selling derivatives to other investors.
Under this strategy, the fund manager agrees to share any future capital gains with a third party. A fee is paid for the agreement, which creates immediate, up-front income. This can be distributed to fund investors as a stream of income.
The downside is if the fund’s holdings rise in value, as some of that gain goes to whoever bought the derivative. Therefore, such funds lag the pack in rising markets.
However, seeing as the buyer’s paid up front, the risk of not being able to deliver a chunk of extra income is limited.
Three UK equity income funds offering an income boost are Schroder Income Maximiser, Premier Miton Optimum Income and Fidelity Enhanced Income. The trio typically yield between 6% to 7%.
However, as these funds are specialists, they would work better as smaller weightings in a portfolio, and in combination with more conventional funds and investment trusts to deliver a mixture of growth and income.
For bonds, it is the riskier end of the market, high-yield corporate bonds and emerging market debt, that offers the best chance of the highest income.
Elsewhere, some infrastructure funds and investment trusts offer yields above 6%. However, this is a more specialist area and higher risk, resulting in sizeable losses for many names in recent years as interest rate rises hit this investment area.
The idea is to keep roughly two or three years’ worth of expenditure in cash. If a notable stock market slump occurs, withdrawals from your investments can be paused and the cash bucket utilised. This gives the pension portfolio a better chance of recovering because money hasn’t been taken out of it.
If possible, top up the cash, so that you are protected again if further sizeable market falls happen in future.
The elephant in the room is that if the market falls for three years and you use all your cash reserves, you will have to sell shares to withdraw your 4% and also sell shares to top up your cash reserve, all at lower prices.
How low is the gamble.
For the fourth year running, Kyle Caldwell has assembled a portfolio of funds aiming to generate £10,000 of income.
4th February 2026
by Kyle Caldwell from interactive investor
Related Investments
The UK stock market was one of the world’s top performers in 2025, with the FTSE 100’s return of 25.8% comfortably outstripping returns across the pond, with the S&P 500 delivering 9.3% in sterling terms.
As a result, UK funds had a strong year, particularly those with a focus on generating income, with the average gain of 18.7% for the Investment Association (IA) UK Equity Income fund sector ahead of returns of 15.4% for the UK All Companies sector and 4.8% for UK Smaller Companies.
Various FTSE 100 sectors performed well both in terms of capital growth and income generation, including financials and defence stocks. In turn, this played a big role in dividend-focused strategies outperforming.
However, while rising share prices are welcome for existing investors, they have the effect of pushing down yields. As a result, I’ve made changes to the 2026 line-up to raise the portfolio’s yield to a higher level than would otherwise have been achieved.
As ever, bear in mind that this portfolio is hypothetical and educational. The portfolio is designed to provide food for thought and demonstrate the challenges DIY investors face when building an income-producing portfolio. For more information, please see the section on ‘purpose of the portfolio’ in the final section of this feature.
The 2025 portfolio (the article can be found here) required £235,000 for the £10,000 income challenge (a portfolio yield of 4.26%).
The hypothetical portfolio size grew to £275,389 at the end of 2025, which represented a percentage return of 17.2%. The income generated fell slightly short, at £9,593, but this shortfall was more than mitigated by a capital gain of just over £30,000 (with the overall total return being just over £40,000). Therefore, income investors could have dipped into their capital for extra cash if necessary.
As the 12-month yield figure is used to reflect the income that’s been generated by the fund, rising share prices had the effect of reducing fund yields, which led to slightly less income being produced than expected.
Below, I share how the portfolios have fared each year since I started constructing them in 2023. While there’s no benchmark to ‘mark my homework’, I’ve listed the return of the IA’s 40-85% Mixed Investment Sector, which in common with this hypothetical portfolio contains funds holding both shares and bonds.
| Year | Income generated | Total return (%) | Mixed Investments 40-85% Shares sector average (%) |
| 2025 | £9,593 (based on portfolio size of £235,000) | 17.2 | 11.6 |
| 2024 | £10,152 (based on portfolio size of £230,000) | 10.0 | 9.0 |
| 2023 | £10,139 (based on portfolio size of £225,000) | 6.9 | 8.1 |
Source: FE Analytics. Past performance is not a guide to future performance.
Funds should be regarded as a medium- to long-term investment rather than being judged over shorter time frames – for good or bad. However, it’s advisable to review your investments annually and consider switches if circumstances have changed.
When investing in funds, the key things to watch out for include whether the same manager is running the fund, whether they are sticking to their knitting in terms of the investment objective and style, and whether performance has soured on the back of too many poor stock selection decisions.
None of those factors applied to the 10 funds I picked for last year’s income challenge.
In terms of the best performers, the UK trio all outperformed the average UK equity income fund. Vanguard FTSE UK Equity Income Index led the way, with a gain of 31.2%.
The value-focused and actively managed Man Income delivered handsome returns, up 27%, while larger company-focused Artemis Income also outperformed peers in gaining 21.7%.
Artemis Monthly Distribution, the portfolio’s largest holding, returned a very solid 23.1%. This fund typically holds 60% in shares and 40% in bonds.
Both global equity income funds from the portfolio also outperformed the sector average return of 12.8% in 2025.
Vanguard FTSE AllWld HiDivYld ETF $Dis VHYD 0.56%
returned 17.7%
while Fidelity Global Dividend was up 15.1%.
Guinness Asian Equity Income lagged its sector average return, up 12.6% versus 19%. But this is perhaps no surprise owing to the strong rising market over a short time period and given the fund’s income focus and equal-weighted approach. Over three years, it has matched the sector average return of 28.3%, but is ahead over five years, up 41.5% versus 25.6%.
Bond fund returns are expected to be less exciting as their role in a portfolio is to generate income and provide defensive ballast against any unwelcome sell-offs in equity markets.
In 2025, I dialled up the portfolio’s exposure to bonds from 30% to 40%. This was due to yields being at attractive levels at the time of around 4.5% on the lowest-risk areas of the bond market such as gilts and money market funds. Moreover, the move to beef up bonds was also down to the prospect of more interest rate cuts occurring in 2025, which would have the effect of boosting bond prices.
Those interest rate cuts did materialise and while yields on the lowest-risk areas of the bond market have been declining (as a result of bond prices rising), there are plenty of opportunities further up the risk scale for bond fund managers to take advantage of.
In 2025, Jupiter Strategic Bond gained 9.8%, followed by returns of
8.4% for Royal London Global Bond Opportunities and
4.4% for Royal London Short Term Money Market fund, which aims to deliver a cash-like return.
| Group/Investment | Starting Value (£) | Total Return (1 January 2025 to 31 December 2025) (%) | Value at end (£) | 12-month yield (as at 31 December 2025) | Estimated Income (£) |
| Global Equity Income | |||||
| Fidelity Global Dividend W Inc | £23,500.00 | 15.09 | 27,046.25 | 2.57 | £604.13 |
| Vanguard FTSE All World High Dividend Yield ETF $Dis | £17,625.00 | 17.69 | 20,743.66 | 2.81 | £494.61 |
| UK Equity Income | |||||
| Artemis Income I Inc | £23,500.00 | 21.68 | 28,594.13 | 3.36 | £788.93 |
| Man Income Professional Inc D | £17,625.00 | 27.00 | 22,384.26 | 4.56 | £804.12 |
| Vanguard FTSE UK Equity Income Index £ Inc | £17,625.00 | 31.18 | 23,121.35 | 4.20 | £740.98 |
| £ Strategic Bond | |||||
| Jupiter Strategic Bond I Inc | £23,500.00 | 9.80 | 25,802.85 | 5.34 | £1,254.72 |
| Mixed Investment 20-60% Shares | |||||
| Artemis Monthly Distribution I Inc | £47,000.00 | 23.07 | 57,841.61 | 3.78 | £1,777.12 |
| Short Term Money Market | |||||
| Royal London Short Term Money Mkt Y Inc | £23,500.00 | 4.43 | 24,540.45 | 4.36 | £1,024.76 |
| Asia Pacific Excluding Japan | |||||
| Guinness Asian Equity Income Y GBP Dist | £17,625.00 | 12.56 | 19,839.47 | 4.13 | £728.75 |
| Global Mixed Bond | |||||
| Royal London Global Bond Opportunities Z GBP | £23,500.00 | 8.41 | 25,475.25 | 5.85 | £1,375.05 |
| Total | £235,000.00 | £275,389 (rounded) | £9,593 (rounded) |
Source: Morningstar. Past performance is not a guide to future performance.
As mentioned in the introduction, for an investor building an income portfolio today, it is more challenging than a year ago as fund yields across the board are lower.
To address this and reduce the amount required for the £10,000 income challenge, I’ve added in two specialist funds that aim to deliver an extra chunk of income at the expense of capital growth.
Overall, the 2026 portfolio yields 4.67%. Generating £10,000 of income would require a portfolio size of £215,000. This is the lowest starting value in the period I’ve been running the portfolio and is an attempt to give the portfolio a greater bias towards income generation.
All yield figures were sourced in late January, but bear in mind that yield figures are not static. In each case the income share class has been chosen, as this share class returns the income back to investors rather than reinvesting the income (which is what the accumulation share class does).
The specialist income funds are not for everyone and the way they invest is not as straightforward as most other funds. However, they are a way of boosting the overall yield of a portfolio, particularly when only funds can be chosen.
Schroder Income Maximiser and Fidelity Global Enhanced Income have been handed weightings of 10% and 12.5% respectively.
Both funds artificially boost their dividend yields through a special technique that involves selling derivatives to other investors.
Under this strategy, the fund manager agrees to share any future capital gains with a third party. A fee is paid for the agreement, which creates immediate, up-front income. This can be distributed to fund investors as a stream of income.
The downside is that when a fund’s holdings rise in value some of that gain goes to whoever bought the derivative. Therefore, such funds lag the pack in rising markets.
Schroder Income Maximiser’s top 10 holdings are all FTSE 100 income heavyweights. Its top 10 weightings are small in percentage terms, with top holding GSK
accounting for 3.3% of the fund and
the 10th-largest position, a 2.7% position.
Fidelity Global Enhanced Income has a very low weighting to the US (just 7.4% of the fund) and an overweight position to the UK of 20.4%. There’s one UK name in the top 10 holdings, Reckitt Benckiser (LSE:RKT), the consumer staples giant.
The fund’s top three holdings are
Taiwan Semiconductor Manufacturing Co Ltd ADR TSM 2.98%
healthcare giant Roche Holding AG ROG 2.30%
and Spanish clothing firm Industria De Diseno Textil SA Share From Split ITX3.36%, widely known as Inditex.
My thinking is that given that risk has been spread across various funds with different mandates, this gives the portfolio plenty of diversification in rising markets (even with the two enhanced income funds) and the bond exposure can protect capital if a stock market downturn occurs.
Exiting the portfolio are Fidelity Global Dividend and Vanguard FTSE All World High Dividend Yield ETF. This is solely down to both fund yields being low, which makes it challenging to have a sufficiently high enough overall portfolio yield.
Fidelity Global Divided has a yield of 2.5%. If I were to choose it instead of Fidelity Global Enhanced Income and handed it the same 10% portfolio weighting it would bring the portfolio’s yield down from 4.67% to 4.34%.
Fidelity Global Divided does typically have a low yield (it was 2.4% a year ago) as the fund aims to limit downside risks by being defensively positioned. However, while I think the fund is a worthy candidate as a global equity income holding, I could no longer retain it given fund yields have fallen across the board compared to when I made my selections a year ago.
Vanguard FTSE All World High Dividend Yield ETF is now offering a yield of 2.8% compared to 3.2% a year ago. As a result, I’ve opted to remove it as part of my plan to have a higher overall portfolio yield. The exchange-traded fund follows the ups and downs of the FTSE All-World High Yield Index, which comprises more than 2,000 large and mid-cap stocks with higher-than-average dividend yields.
For the bonds, one change has been made to the 2026 line-up. Royal London Short Term Money Market has been removed in favour of L&G Short Dated £ Corporate Bond Index.
Over the past couple of years, money market funds have proved to be a solid allocation for cautious investors, or for those looking to park cash for a short time. In 2025, money market funds returned 4%-plus in sterling terms, with negligible volatility.
However, interest rate cuts mean the amount of income such funds can generate is declining. With UK interest rates standing at 3.75% at the time of publication, and the expectation of one or two cuts in 2026, this will quickly feed through into lower future returns for these funds. A year ago, Royal London Short Term Money Market had a yield of 4.8%, but it is now 3.9%.
In theory, lower rates could lead some investors to take on greater risk elsewhere in pursuit of potentially higher returns.
One route for investors with a slightly higher risk appetite might be short-dated enhanced income funds, which generally offer more attractive yields. However, the trade-off is that a bit more risk needs to be taken versus money market funds that aim to deliver a cash-like return.
One option is the L&G Short Dated £ Corporate Bond Index fund, which invests in investment-grade sterling bonds with less than five years to maturity and tracks the Markit iBoxx GBP Corporates 1-5 Index. The distribution yield is around 4.7% and the yearly fee is 0.14%.
Overall, the bond exposure is around 35%, which is slightly less than last year’s 40% weighting. This is due to handing Artemis Monthly Distribution a 15% weighting rather than a 20% weighting due to a lower fund yield (3.7%) than a year ago (4.3%).
| Fund | Yield (%) | Percentage weighting (%) | Investment (£) | Estimated income | How often the dividend is paid |
| UK equity income | |||||
| Artemis Income | 3.3 | 7.5 | 16,125 | 532.125 | Twice a year |
| Man Income | 4.3 | 7.5 | 16,125 | 693.375 | Monthly |
| Schroder Income Maximiser | 7 | 10 | 21,500 | 1505 | Quarterly |
| Vanguard FTSE UK Equity Income Index* | 4.2 | 7.5 | 16,125 | 677.25 | Twice a year |
| Global/overseas income | |||||
| Fidelity Global Enhanced Income | 5.1 | 12.5 | 26,875 | 1370.625 | Quarterly |
| Guinness Asian Equity Income | 3.5 | 10 | 21,500 | 752.5 | Twice a year |
| Mixed Asset | |||||
| Artemis Monthly Distribution | 3.7 | 15 | 32,250 | 1193.25 | Monthly |
| Bonds | |||||
| Royal London Global Bond Opportunities | 6 | 10 | 21,500 | 1290 | Quarterly |
| Jupiter Strategic Bond** | 4.7 | 10 | 21,500 | 1010.5 | Quarterly |
| L&G Short Dated £ Corporate Bond Index*** | 4.7 | 10 | 21,500 | 1010.5 | Twice a year |
| Total | 4.6675 | 100 | 215,000 | 10,035 (rounded) |
All current yield figures sourced from Trustnet at end of January and additional check made that yields are in line with the fund firm factsheets with additional check with latest fund firm factsheets that show dividend yield figures, apart from the three stated below. Past performance is not a guide to future performance.
This fund aims to provide a steady and growing income along with capital growth. It has a larger company focus, which accounts for 85% of the fund. Banks are well represented, with Lloyds Banking Group LLOY 0.49%
and NatWest Group NWG 0.38%
having weightings of 4.9%, while
Barclays BARC3.66% is also in its top 10 holdings, accounting for 4.1%.
Its longstanding fund manager Adrian Frost has managed the fund since 2002, with signs of robust succession planning in place, with co-manager Nick Shenton joining in January 2013 and co-manager Andy Marsh joining in February 2018.
The fund adopts a value-driven approach to provide a yield well in excess of the FTSE-All Share’s. Henry Dixon has managed the fund since inception in November 2013, when he joined Man GLG.
It pays a monthly income, which is rare for a UK equity income fund as most pay out quarterly or twice a year.
The index this tracker fund follows – the FTSE UK Equity Income index – consists of shares “that are expected to pay dividends that generally are higher than average”. Therefore, its performance and income generation is heavily influenced by the biggest FTSE 100 dividend stocks.
It has comfortably outperformed the UK equity income sector average over one, three, five, and 10 years. As well as performance beating many fund managers, the fund generates a higher yield than the wider market at 4.2% versus around 3% for the FTSE 100 index. However, its yield is notably lower than a year ago, when it stood at 4.9%.
An equally weighted approach to 36 stocks helps to reduce stock-specific risk. Edmund Harriss, who has managed the fund since inception in 2006, focuses on high-quality companies paying dividends and with sustainable competitive advantages, such as firms with products or services that are better than competitors.
China accounts for its biggest country weighting, at 39.7%, followed by Taiwan, which comprises 19.3%.
The mixed-asset fund paying a monthly income typically has 60% in shares and 40% in bonds.
It is managed by four experienced specialists. Jacob de Tusch-Lec and James Davidson are responsible for managing the equity part of the portfolio, co-ordinating with Jack Holmes and David Ennett who manage the bond exposure.
The fund focuses on “attractive valuation and income characteristics, diversified beyond the ‘usual suspects’ often held by competitors”.
The strategy has a strong track record, ranking in the top quartile of the IA Mixed Investment 20-60% Shares peer group over one, three, five and 10 years.
Investing in under-researched parts of the market, including unrated bonds, this fund’s been a solid performer across multiple time periods.
It can invest across a broad spectrum of global fixed income, encompassing investment grade (those deemed “high quality”), sub-investment grade and unrated bonds, which helps to mitigate risk while providing considerable opportunities. The combined exposure to high yield and unrated bonds is considerable, sitting at just over 60%.
It is managed by the experienced duo of Rachid Semaoune and Eric Holt.
This is a “go anywhere” fund, meaning the managers can seek out the best opportunities within the global bond universe while carefully managing downside risk.
Bonds are picked based on the managers’ view of the global economy, with them assessing how much risk it is appropriate to take, deciding which sectors and countries offer the best opportunities, and considering factors such as inflation, interest rates and economic growth.
The fund is managed by the highly experienced Ariel Bezalel since inception in June 2008, alongside Harry Richards, who has been a manager on the fund since 2019 and joined the firm in 2011.
The hypothetical portfolio aims to show DIY investors how they can build their own diversified income portfolios alongside wider research.
The funds are chosen on the basis that over the medium to long term they would be expected to grow both capital and income. However, there are no guarantees these aims will be achieved.
Moreover, it’s important to be mindful of the fact that overall total returns (capital and income combined) can decline, especially in the short term.
Bear in mind that funds must distribute all the income generated each year. Therefore, when income dries up, as it did in 2020 when the Covid-19 pandemic emerged, a dividend cut is pretty much inevitable.
Investment trusts, on the other hand, can hold back up to 15% of dividends received each year, which means they can build up a reserve to bolster payouts in leaner years.
Ever wondered what size an ISA portfolio is required to add up to as much as the State Pension? This Fool crunches the numbers and reveals all.
Posted by Andrew Mackie
Published 4 February
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
Today, the State Pension pays £11,502 a year. The obvious question is what size ISA it would take to generate the same income independently – effectively doubling retirement income for someone who also qualifies for the full State Pension.
Once the contribution phase of an ISA ends and withdrawals begin, the challenge becomes simple in theory but tricky in practice: balancing portfolio growth with a sustainable income.
The chart below illustrates this. The blue line assumes contributions stop today and a portfolio is already in place. That portfolio supports a State Pension-matched withdrawal every year until age 90.
I assume the State Pension grows at 4.5% a year, inflation runs at 2%, and the remaining portfolio delivers a conservative 4% annual return. During drawdown, protecting capital matters more than chasing high growth. Under these assumptions, the portfolio required is £240,000.
Chart generated by author
The picture changes if you’re still in the accumulation phase. To illustrate, let’s assume an investor is 45 and planning ahead.
Because the State Pension is assumed to rise by 4.5% a year, its annual value in 20 years would be close to £27,000.
That’s where the orange line comes in. As the chart shows, only one trajectory supports a pension-matched withdrawal through to age 90. In this scenario, the required portfolio rises to around £550,000.
Reaching a £550,000 portfolio value within a 20-year investing time frame is certainly a challenge. But I believe it’s achievable with a carefully selected portfolio of high-growth stocks and low-volatility dividend stocks.
In the former category, the energy transition provides investors with an opportunity for exposure to a trend that’s still very much in its infancy.
One metal is at the heart of the energy transition: copper and mining giant Glencore (LSE: GLEN) is positioning itself to be one of the biggest copper producers on the planet over the next decade.
The recent merger talks with Rio Tinto highlight the strong position in which the miner’s portfolio puts it. While the deal is far from certain, it underscores how valuable its copper assets are viewed by its bigger peer.
When it reports later this month, copper output will be in the region of 850,000 tonnes. By 2035, its targeting output of 1.6m.
Over the past year, copper prices have exploded 40%. This isn’t only down to increasing demand but also reflects extremely tight supply.
Chile is the undisputed king when it comes to copper production accounting for over a quarter of global production. But new discoveries are becoming increasingly harder to come by and ore grades are in long-term decline.
That said, the recent run-up in the stock can be directly attributable to merger talks. Even if an agreement is reached, a merger of this size brings with it huge risks. Rio Tinto is a pureplay conventional miner, whereas Glencore’s roots are in trading. Marrying such different corporate cultures could potentially result in a larger cost base.
There are many ways for investors to gain exposure to the biggest macro themes of the day including electrification, onshoring and the AI arms race. But for me the greatest value today lies not in the technologies themselves but upstream: sourcing the critical minerals that turn bold ambitions into reality. That’s why Glencore earns a place in my ISA portfolio and could be worth considering.
Remember : a bad plan is better than no plan but a plan without an end destination is still bad plan as it relies on luck.
The holy grail of investing is when you have a share in your Snowball that has returned all your capital, either thru share price appreciation and or dividends. You take out your capital and you have then achieved the Holy Grail of Investing in that you have a share that provides income at a zero, zilch cost and then you can re-invest the capital released, into another high yielding share and try to do it all again.
The current meaning of ‘ Share’ is Investment Trusts (CEF’s) or ETF’s. Currently the SNOWBALL invests mainly in Investment Trusts because some have a discount to NAV, with luck and if you
perseverance may pay off.
The current best share in the SNOWBALL is SUPR, where we have earned two years of dividends. A long road ahead, full of bumps and twists and turns before the Snowball achieves the Holy Grail of Investing.
The worst aspect of having a Snowball, is that you sometimes you wish your life away as you wait for the next dividend, so you can re-invest.
When you start to spend your dividends that problem will disappear, like snow on a summer’s day.
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