I’ve sold the SNOWBALL shares in NRR for a profit of £200. At the open there is a wide spread and as the results are due next week, it could mean being trapped in the share if the results are not as expected.
I’ve sold the shares in FGEN for a total profit of £725.
I may buyback some of the shares before their xd date next week.
You do not need to take big chances with your money but you do have to trade reward/risk. We will use the chart of CTY, the ultimate belt and braces Trust as they have paid increased dividends for over 50 Years.
The chart with a simple re-invest the dividends plan has gone up from £3.25 to £9.30.
Looking at the chart, you will notice the price never moves up in a straight line, after 4 years the price is where you started from, although you own more shares. The recent price action, compared to it’s history, indicates the price is overbought.
The dividend has risen gently from 16.45p to 22.1p. A yield on buying price of 6.5%
Having achieved the Holy Grail of Investing, using a lot of hindsight, you could sell some shares, whilst retaining your original stake, buy two more positions to try and do it again, while still earning income from CTY, that sits in your account at zero, zilch, nothing.
May 20, 2026
Rida Morwa
Investing Group Lead
Follow Seeking Alpha on Google for the latest stock news
Summary
- Stop trying to gamble on prices. Treat your portfolio like a cash-producing business instead.
- Dividend cash flow provides a tangible, calming metric that prevents panic selling during violent market drawdowns.
- Never Forced to Sell: High-yield dividends generate constant liquidity, meaning you dictate the terms of your portfolio, not your monthly bills.
- You don’t need a massive lump sum subjected to daily market whiplash; you need a permanent, recurring paycheck.
- Looking for a helping hand in the market? Members of High Dividend Opportunities get exclusive ideas and guidance to navigate any climate.
Co-authored with Beyond Saving
You are preparing for retirement, or maybe you have recently retired, and you have decided that you want to manage your own investments.
Congratulations! You have already taken two steps that a very large number of people never take: you saved up capital, and you took charge of it. Too many people just go through life crossing their fingers and hoping everything will work out.
Now what?
Every day, I talk to investors who treat the stock market like a lottery ticket. They scour the market looking to make quick trades, hoping that they can buy something that will become popular and then sell it before it becomes unpopular. There are several strategies that attempt to achieve this. Some focus on technical trading signals that attempt to be ahead of the popularity curve. Others focus on trying to predict news cycles, trading in and out of sectors as their popularity increases or decreases based on what’s happening in the news cycle. Others will buy ideas that they think might become the next big thing, hoping to find the next NVIDIA Corporation (NVDA) to offset the fizzles like Beyond Meat, Inc. (BYND). All of these strategies revolve around the idea of buying a stock to sell it at some point in the future, hopefully at a higher price.
There are many ways to make money investing in the stock market, and I encourage you to find a strategy that works for you. Our strategy is different from all of those above. Our strategy isn’t to buy things because we believe we will find some sucker willing to pay a price higher than we would be willing to pay. Our strategy isn’t to spend our later years selling off the shares we worked so hard to accumulate.
We are income investors. Our strategy is to turn our portfolios into a cash-producing business. A business that produces enough cash to meet our needs in retirement and retain enough to reinvest for future growth. Today, let’s address the top three reasons why we are income investors.
Reason 1: Emotional Control
The stock market is a volatile place. While we’ve been in an extended bull market where the market is green more often than not, I am old enough to remember the arrogant swagger of the dot-com bubble. Investors felt invincible; they were up so much, and everything they invested in was making so much money.
I remember going into the Great Financial Crisis; smart people were frequently saying things like, “Buy real estate, it only goes up!” People who had no construction or real estate experience at all were getting into flipping houses. Investors were piling into mortgages and mortgage derivatives.
Then the bubbles popped, the stock markets collapsed, and the people who were so sure of themselves the previous year panicked. Sure, it’s easy to say, “Don’t panic,” and that is fantastic advice. Yet, the reality is that for all of us, that big number in our brokerage account represents something that is “a lot” of money to us. When “a lot” becomes a lot less, panic is a natural reaction.
Intellectually, we can know that market sell-offs happen and that the market has always recovered in the past, and it will probably recover this time too. Yet, the very fact that sell-offs happen is proof that people sell when they get scared.
Focusing on the cash flow that your portfolio produces gives you a tangible metric that measures the underlying performance of the companies you invest in, not the emotional sentiment driving prices. When the market is falling around you, I have found that focusing on the income my portfolio is capable of producing provides a framework for working through decisions in an emotionally charged time. Instead of reacting emotionally, it gives me tangible numbers to work with and navigate stressful situations.
Reason 2: Never Be Forced To Sell
Most of us are investing for retirement, which means that we intend to withdraw money from our portfolios to pay for things while we are retired.
Many investors have the idea that they will save up $X and then, during their retirement years, withdraw a certain amount. Those withdrawals will be funded by selling shares. Which is great—if share prices go up.
However, the reality is that shares don’t always go up. They can go down, and they can stay down for a very long time. For example, from January 2001 to January 2010, the S&P 500 had a total return of 0.01%:
That is the total return with $0 withdrawn. On a $1 million portfolio, you had a gain of approximately $100. Maybe you can sell shares for more than you paid, but maybe you can’t. That is an uncertainty that all retirees have to deal with because you don’t know if you are retiring in 2001 or 2010.
Many investors have come to expect the short-term drawdowns we experienced with COVID-19 or in 2022. Those are relatively easy because it is reasonable to wait for 6-12 months to liquidate shares. When you’re 70 or 80 years old, waiting for 10 years so you can sell stock at a higher price might not be practical.
By having a portfolio that is producing income, you have a constant cash flow in your portfolio, whether prices are high or low. You get to choose how much of that cash flow to withdraw, how much to reinvest, and how much to hold in cash. When your cash flow is high enough to meet your liquidity needs, you are never forced to sell a share. Certainly, you will sometimes decide to sell shares because the market is offering you a great price, or maybe you decide the investment is no longer an attractive risk. But the key is that the decision is yours to sell because you believe it will improve your portfolio, rather than selling because you have to pay bills.
Reason 3: Building A Perpetual Income Machine
When I started investing for income, my goals were quite modest. How cool would it be if I had an income stream that was enough to pay my water bill every month? I’d never have to pay a water bill again because my portfolio would generate enough cash flow to cover that bill. After that, it became about paying the internet bill, then the electric bill, and the goal kept moving higher until the income from my investment portfolio exceeded all of my bills.
Warning: Income investing may be addictive!
As part of the Income Method, we recommend planning on reinvesting a minimum of 25% of your income. This provides two benefits. First, it creates a built-in cushion to absorb dividend cuts and fluctuations from investments that pay variable dividends. Dividends aren’t guaranteed, and even bonds default sometimes, so it is prudent to build in a cushion so that when things happen, it doesn’t negatively impact your ability to withdraw what you need.
Second, it means that your portfolio is constantly reinvesting. You are always a net buyer, and those new shares that you are buying pay more dividends. Every month, you own more shares and are collecting more dividends than the month before. Over time, the power of compounding works its magic on your cash flow. Your income continues to grow, even if you aren’t adding any new capital to the portfolio.
That is the ultimate goal, where the cash flow your portfolio is producing is growing on its own, even as you withdraw a portion of it to fund your needs and wants. Where you don’t have to worry about outliving your portfolio because you aren’t selling it off. Your portfolio is providing the cash for you to invest more every month.
Conclusion
Look, there is no magic bullet when you’re investing. There is no “get rich quick” scheme that consistently works, and there are no guarantees. The Income Method isn’t about being “conservative”; it’s about being methodical. It’s about approaching your investing like a business that you are building from the ground up.
It’s about having a clear goal that is fixed, and you can clearly measure your progress. How much money do you need to retire? $1 million, $3 million? The answer greatly depends on when you retire because $1 million in 2001 is a lot less than $1 million in 2003. Stock prices change every day. How much income do you need to retire? Well, you know how much you make while you’re working, so that should give you an excellent handle on how much money you need every year to pay your bills and fund the retirement lifestyle you choose to live. That number doesn’t change, except for inflation. So, you can measure your progress clearly and know whether you are getting closer and whether you are on track. Saying “I need my portfolio to generate $80,000 in recurring cash flow” is much clearer than saying “I need a portfolio with a value of $1 million.”
When you retire, you don’t need a big lump sum of cash. Odds are that you are going to leave a substantial portion invested in the stock market, where the prices will change with the next news alert. What you need is the knowledge that you can withdraw the cash you require every single year for the rest of your life. When you retire, you are losing an income stream. So, replace your income stream with an income portfolio.
That is why I follow the Income Method.
AI Bots Crashed $10K in 2 Weeks While Our “Beat-the-Bot” Divvie Sails Higher
Brett Owens, Chief Investment Strategist
Updated: May 27, 2026
Think it’s a good idea to ask ChatGPT to run your retirement portfolio?
(I know that you don’t, my careful contrarian. But we both have friends that are more than tempted to trust the bots! Here are the cautionary numbers that show AI models are not very good at running money.)
A startup called Nof1 recently ran an experiment. It handed $10,000 each to Claude, ChatGPT, Gemini, Grok and four other leading AI tools. The humans gave “seed capital” to the bots.
Here’s $10K. You have two weeks to trade US stocks. Make some money. Now GO.
How much do you think each bot turned its initial $10K into? Well, whatever you’re thinking, go lower.
The broader “bot portfolio”—all of the money given to AI—lost a third of its capital. Down 33%. In just two weeks!
What’d they do wrong? Uh, just about everything. First, they overtraded. Second, they each took the exact same marching orders but went off in completely different directions.
Grok, Elon Musk’s AI product, was (would you believe it?) the “calmest” of the bunch. Grok placed “just” 158 trades over two weeks. Usually, trading like that is a reliable way to shred money. If you and I decide we’re going to turn up the frequency of our moves to 75+ per week, our trades will be suboptimal. To put it lightly!
And, to add to the confusion, the bots moved money with different biases. Yes, even the robots have predetermined blind spots. Claude (from Anthropic) tended to go long. Gemini (from Google) shorted stocks! And Qwen, a Chinese model, leveraged up because, hey, when you’re losing money why not borrow more of it? (When you’re taking poison, who cares how much? Ha!)
The bots blew up their portfolios because they thought they knew more than they did. They pulled historical data, identified trends that worked in the past, and concluded that the future would be the same. In other words, they built trading systems on the fly that looked great in the lab but fell flat on their faces in real life!
It’s the Mike Tyson school of hard knocks. Everyone has a plan until they get punched in the face.
Eight bots took $10,000 down to $6,700 in two weeks — a pace that lands you at zero inside a year. Meanwhile, we contrarians have quietly compounded 30% on a blue-chip biotech the bots overlook. That stock is Amgen (AMGN).
The purple staircase below is Amgen’s dividend. The orange line is the share price, sometimes meandering but eventually racing to catch up with the dividend hikes. In April 2024, we bought the price dip and added Amgen to our Hidden Yields dividend growth service. Two weeks ago, we highlighted the latest dip as a Best Buy opportunity!
Amgen’s Divvie Magnet to the (Perennial) Rescue!
This is the powerful dividend magnet. Over time, a steadily rising payout drags the share price higher.
So, why can’t the bots model this? They can for short periods, but they lose focus. The robots draw too many conclusions, seeing patterns when they aren’t there—like reading tea leaves. They become too sure of themselves and fire off one thousand trades in a cool week or two.
We don’t need all that tail chasing. Amgen’s rising dividend is a surer bet than perceived (real but not repeatable) AI patterns. It is the cash cow of the biotech sector. The company boasts 70% gross profit margins, powered by a research engine that flows to the cash faucet.
Today, Amgen trades at 5-times sales. Compare it to NVIDIA, which runs on similar margins, but costs 22-times sales. NVIDIA is priced for perfection, which may continue to come true. But I’d rather bank the dividend-raising cash machine that quietly compounds without the “I hope earnings will be over the moon” type of drama.
Amgen also boasts a stock buyback machine that retired 29% of its share count over the past decade. Fewer shares to pay dividends on means more cash per remaining share, which feeds the next dividend raise, which feeds the dividend magnet. A virtuous cycle for us!
The growth engine underneath? Rare diseases. Amgen built its first fortune on pathbreaking red and white blood cell boosters for cancer patients, but its latest is a rare-disease segment. It didn’t have one just a few years ago. Then in October 2023, management dropped $27.8 billion on Horizon Therapeutics, the largest deal in company history. The prize: Tepezza, the leading treatment for thyroid eye disease, and a full rare-disease pipeline.
A disease may indeed be rare—have few patients—but put together breakthroughs and your combined revenues help people and… yes… your business.
Of the more than 10,000 rare diseases identified today, only 5% have approved medicines, and Amgen has the R&D and manufacturing muscle to keep filling that gap profitably. Its Horizon acquisition bet is paying off. Amgen’s rare disease segment did $5.2 billion in revenue last year, growing 25% year-over-year in the most recent quarter. Tepezza alone brought in $490 million in Q1 2026.
Wall Street is waking up, but slowly (as always). Freedom Broker just upgraded AMGN to Buy with a $375 price target. That happens to be the exact buy-up-to price I raised for our Hidden Yields subscribers recently.
Nice of one suit to confirm our homework! There will be more rubber stamps on the way, as other shops still lag. BofA puts Amgen at $307. Guggenheim, $340. Morgan Stanley, $326. The full Wall Street average price target now sits around $357—above today’s price, but still short of where this dividend grower will land.
Earlier this year Amgen topped $388 but it has pulled back since over concerns about Tavneos, one rare-disease drug. True, this drug is a small revenue line, with $119 million in Q1 sales. But the forest for that tree? Amgen’s three rare-disease blockbusters—Tepezza for thyroid eye disease, Uplizna for autoimmune disorders, and Krystexxa for chronic gout—raked in over $1 billion. That’s 8-times Tavneos in 90 days. Uh, which do you think matters more?
Tavneos is a sideshow while the Horizon-era main act keeps humming. This presents us with a second-chance window to buy! The dip I flagged for HY subscribers two weeks ago hasn’t closed—yet. However, it’s likely only a matter of time because the dividend magnet keeps tugging. Let’s take advantage while the bots are frantically throwing trade tantrums!
Amgen is just one of many dividend magnets I track — and far from the only setup like it. The same pattern shows up across the dividend-payer universe: payout marching higher, price wandering before racing to catch up, Wall Street late to the party as always.
FGEN having declared their next dividend the figure for the half year income will be
£7,978
Do not scale to reach a year end figure as it contains a special dividend.
The SNOWBALL will meet the 2031 fcast
If you can compound your Snowball’s income at 7%, it will double every ten years.
If you can compound your Snowball’s income at plus 7%, it will double in less than ten years.
Foresight Envr – Net Asset Value and Dividend Announcement
FORESIGHT ENVIRONMENTAL INFRASTRUCTURE LIMITED
(“FGEN” or the “Company”)
Net Asset Value and Dividend Announcement
The Board of FGEN, a leading investor in private environmental infrastructure assets across the UK and mainland Europe, announces that its unaudited Net Asset Value (“NAV”) at 31 March 2026 was £655.5 million (105.2 pence per share). After paying the quarterly dividend of 1.99 pence per share, the Company delivered a positive NAV Total Return of 2.5% for the quarter and 6.2% for the full financial year.
FY27 Dividend Target
The Board is pleased to announce the Company’s 12th consecutive dividend increase since IPO, with a dividend target of 8.04 pence per share for the year to 31 March 2027, representing a 1.0% uplift from the year to 31 March 2026.
Highlights in the period
· Delivering resilient NAV growth: NAV of £655.5 million as at 31 March 2026 (31 December 2025: £651.7 million), with NAV per share of 105.2 pence, representing an increase of 0.6 pence over the quarter.
· Dividend in line with target: Quarterly dividend of 1.99 pence declared, in line with the Company’s full-year target of 7.96 pence per share.
· Diversification underpinning resilience: Portfolio diversification supports stable NAV and robust cash generation, with dividend cover of 1.25x for the year, post project debt amortisation.
· Prudent balance sheet maintained: Gearing remains conservative at 29.8% as at 31 March 2026 (30.9% at 31 December 2025), supporting financial flexibility and disciplined capital allocation.
· Well positioned for organic NAV growth: the Board remains focused on delivering the Company’s progressive dividend strategy, alongside NAV growth through consistent operational performance, value enhancements and selective capital recycling.
Ed Warner, Chair of FGEN said:
“The Company has delivered another quarter of stable NAV performance, reflecting the resilience of our diversified environmental infrastructure portfolio and its ability to generate robust cashflows. This underpins our confidence in maintaining a progressive dividend, which has consistently increased since IPO, with cover expected to remain within our target range of between 1.2x – 1.3x in the coming years.
We remain focused on maintaining a prudent balance sheet and disciplined capital allocation, positioning the Company to deliver sustainable and organic NAV growth.”
Summary of changes in NAV:
| NAV per share | |
| NAV at 31 December 2025 | 104.6p |
| Dividends paid in the period | -2.0p |
| Power price forecasts | +1.6p |
| Inflation | +0.3p |
| Anaerobic Digestion life extensions – phase one | +1.4p |
| Other movements (including discount rate unwind less fund overheads) | -0.7p |
| NAV at 31 March 2026 | 105.2p |
Valuation factors
Power price forecasts
Short-term power price forecasts provided by independent third-party consultants have increased since the prior valuation date, primarily driven by higher observable gas and power pricing following the escalation of conflict in the Middle East. In addition, updated forecasts now reflect the expected impact of the UK Government’s proposed abolition of the Carbon Price Support mechanism from April 2028, alongside updated GWA assumptions across the UK wind and solar portfolio.
Overall, the net effect of updated power price forecasts was an increase in NAV per share of 1.6 pence.
Inflation
Inflation assumptions for 2026 have been increased by 50bps to reflect updated independent forecasts, with RPI and CPI now modelled at 4.0% and 3.5% respectively.
Inflation assumptions beyond 2026 remain unchanged.
Anaerobic Digestion (“AD”) life extension – phase one
As outlined in prior reporting periods, the Company has long held the view that AD infrastructure will continue to play an important role in the UK energy mix beyond the 20-year Renewable Heat Incentive (“RHI”) support period.
As such, the Investment Manager has worked with a specialist independent consultant to assess the potential value of biomethane from 2035 onwards, informed by current and expected evolution of biomethane policy in the UK and Europe. The consultant has applied this assessment across the FGEN AD portfolio, including revenue stack analysis and cost requirements, taking into account the technical specifications of each facility.
As a result, the Company has recognised a 1.4 pence per share NAV uplift from extending the lives of the six ADs with the most compelling extension potential, with work ongoing to further assess the remaining ADs in the portfolio.
More details will be provided along with the full Annual Report.
Other NAV movements
Other NAV movements include the usual positive discount rate unwind net of fund operating costs of +1.3 pence, alongside a number of other offsetting lower value movements. These include an allowance for additional boiler maintenance at Cramlington Biomass totalling -0.7 pence, refinement of cost assumptions across the wind and solar portfolio of -0.9 pence and an allowance of -0.5 pence at Project Rjukan related to slower than planned ramp up progress during the period.
Gearing
In line with the Company’s stated approach to capital allocation, FGEN continues to maintain one of the lowest levels of gearing in the sector. As at 31 March 2026, total gearing was 29.8% (31 December 2025: 30.9%), with the Company’s Revolving Credit Facility (“RCF”) £123.1 million drawn.
Portfolio performance
The quarter ending 31 March 2026 has seen positive performance, with generation 2.6% ahead of budget. This was supported by particularly strong performance from the anaerobic digestion portfolio. Whilst wind, solar and biomass underperformed during the period, March saw excellent performance across those sectors.
As communicated at the Company’s Capital Markets Day on 12 May 2026, ramp up continues across the growth assets:
– CNG: gas volumes dispensed grew again during the period, and the RTFC business continues to be highly cash generative.
– The Glasshouse: continuing the trend of increasing sales, management also made further progress against its longer-term objective of export opportunities into European markets.
– Rjukan: production volume growth has been slower than expected in the period, reflective of the early operational stage, with works ongoing to continue optimising performance.
Dividend
The Company declares a quarterly interim dividend of 1.99 pence per share for the quarter ended 31 March 2026, consistent with the full-year target of 7.96 pence per share for the year to 31 March 2026, as set out in the 2025 Annual Report. This equates to a yield of 10.5% on the closing share price on 26 May 2026.
As mentioned, the Board has also set a dividend target of 8.04 pence per share for the year to 31 March 2027, the 12th consecutive dividend increase since IPO.
Dividend Timetable
Ex-dividend date 4 June 2026
Record date 5 June 2026
Payment date 26 June 2026.
About FGEN
FGEN invests into environmental infrastructure to deliver stable returns, long term predictable income and opportunities for growth, whilst driving decarbonisation and sustainability.
Investing across renewable generation, other energy infrastructure and sustainable resource management, it targets projects and businesses with an emphasis on long term stable cash flows, secured revenues, inflation linkage and the delivery of essential services. FGEN’s aim is to provide investors with a sustainable, progressive dividend per share, paid quarterly, alongside the potential for capital growth.
The target dividend for the year to 31 March 2027 is 8.04 pence per share¹.
FGEN is not formally subject to the EU Sustainable Finance Disclosure Regulation, but voluntarily discloses against the requirements of an Article 9 SFDR fund. It further discloses voluntarily against the UK’s Sustainability Disclosure Requirements regime as a ‘Sustainability Focus’ fund. Beyond its alignment with evolving regulation, FGEN prides itself on its transparent and award-winning approach to ESG.
(1) These are targets only and not profit forecasts. There can be no assurance that these targets will be met or that the Company will make any distributions at all.
North American Income Trust NAIT with dividends re-invested.
Without the market outperformance since 2025, hardly a compelling argument to buy and hold.
North American Income Trust PLC on Friday said it is well placed to identify winners amid ongoing market disruption, as it posted full-year gains in net asset value.
The Edinburgh-based investor in US equities reported a NAV per share with debt at fair value of 402.8 pence at January 31, up 5.3% from 382.5p a year earlier.
North American Income reported a NAV per share total return of 8.8% for the financial year, while its reference indices, the Russell 1000 Value Index and S&P High Yield Dividend Aristocrats Index, returned 4.9% and 3.1% respectively over the same period.
The investment trust declared a fourth interim dividend for the financial year of 4.4p per share, up 7.3% from 4.1p a year prior. This brought its total dividend per share to 12.80p, up 4.9% from 12.20p.
Co-Fund Managers Fran Radano and Jeremiah Buckley said the financial year reflected “another positive period for US share prices”, as they noted the 5.4% gain in the S&P 500.
The fund managers explained that outperformance was primarily owed to stock selection over sector positioning, with the financials sector a “significant contributor to performance”.
They noted strong returns from Citigroup Inc, Morgan Stanley and Goldman Sachs Group Inc supported the positive outcome.
The biggest detractors, noted the fund managers, were in industrials and communications services, also owing to stock selection.
Radano and Buckley said that in industrials, a weaker performance from Booz Allen Hamilton Holding Corp outweighed gains elsewhere.
They added that their underweight position in Alphabet Inc also served as a detractor.
Looking ahead, Chair Charles Park said stocks globally have been impacted by the war in the Middle East, adding that technological developments, namely in the form of agentic AI are also disrupting markets.
“There are strong debates as to the degree of disruption and how long this might take, but we are already witnessing some of the effects. The board remains confident that the experienced team at Janus Henderson Investors, with all its resources, is equipped to distinguish between the winners and losers in this new dispensation,” the chair stated.
24/04/26
S&P 500 and beyond: how popular US trackers and ETFs compare
Friday, May 22, 2026
Eve Maddock-Jones
Funds and Investment Trust Writer
Related news
The US is the second most popular equity market to track, bested only by global options, with the most popular passive options housing billions in investors’ money.
Having previously gone under the bonnet of the global passive funds AJ Bell customers favour most, we’re turning our attention to the US.
As our research shows, the top 10 most popular products all have their own set of characteristics which feed into better or worse performance and higher or lower fees depending on which one you choose.
Why is the US so popular among passive investors?
Passive investing overall has become increasingly popular and the US in particular has become a favourite destination for this style of investing simply because it’s delivered consistently high returns for the best part of 20 years.
This has been underpinned by tech firms delivering significant growth and by low levels of inflation and interest rates making the growth stocks which populated the US market more attractive.
Since 2006 the S&P 500 has made almost double the total return from the MSCI All-Country World Index – of which the US market is now 63%.
This made it tough for active managers to outperform, as AJ Bell’s ‘Manager versus Machine’ report found last year, and as a result, many investors have opted to take cheaper exposure via trackers instead.
Recent data found that UK retail investors put £28 billion into trackers in 2024, smashing the previous record set four years prior by almost £10 billion. This was a “stark contrast” to the £29 billion outflows from active funds, flagged by the Investment Association.
US funds took in a healthy chunk of these flows and monthly data shows that the trend hasn’t stopped since, bar events like Liberation Day and the US-Israel-Iran war stirring bouts of negative US sentiment.
A scan of the top holdings among AJ Bell customers and US passive funds are among some of the most widely held options.
But as we discovered in our global fund analysis, the most commonly owned funds may all appear to be the same on the surface, but can vary widely in terms of what they’re actually made up of and/or how much they cost.
Defining passive investing
‘Passive’ investing involves using a tracker fund or exchange-traded fund (ETF for short) to replicate the underlying index. This is unlike an active fund which has a manager picking just a few names they think will do better than the whole index combined.
This makes passive investment products cheaper because you just buy and hold a bit of everything in that index and aren’t paying the higher active management fees to get a more bespoke portfolio.
Because the US has been so popular the market is highly saturated and experts often say it’s a ‘race to the bottom’ with regards to fees. From our review of the most popular funds, fees ranged from 0.07% to 0.3%.
How tracker funds and ETFs are different
ETF and tracker funds are structurally different as well. An ETF is listed on the stock exchange (S&P, Nasdaq, FTSE for example) which means you buy and sell it just like you would shares in a company. You can buy them at any time, but the price will change depending on the intra-day moves.
Index funds are different as the price is based on the total value of all securities held within the fund, also known as the net asset value, and you’re only able to trade them once a day.
The US isn’t just one index
When discussing the US equity market, most investors focus on two indices: the aforementioned S&P 500 or the Nasdaq 100. Most of the popular ETFs and tracker funds tend to follow one of these indices.
And while often conflated, each have their own set of characteristics, which matters when it comes to picking the benchmark you’re tracking.
Straight off the bat you can see a big disparity in the amount of stocks they include, 500 versus just 100 (although there is also a Nasdaq Composite index which includes more than 3,000 stocks).
This makes the S&P the more diverse of the two and it’s why it is used as an overall gauge on the state of the US market. Meanwhile, the narrower Nasdaq is more volatile, because the fortunes of an individual company or handful of companies can have a greater impact on the basket’s average returns.
This has created some disparity in the indices’ respective performance, and therefore the portfolios tracking them.
Over 10 years, the Nasdaq has bested the S&P’s total returns over most time frames, delivering almost double the level of returns over 10 years.
This plays out in the performance data of the trackers as well, although not all of them track these two indices.
Comparing all 10 of them over five years, the total return ranged from 105.4% from the iShares NASDAQ 100 UCITS ETF to 75.92% in the Vanguard US Equity Index.
Digging a bit deeper, the S&P 500 and Nasdaq 100 indices themselves have very distinct characteristics.
The S&P 500 only allows US domiciled stocks in its universe, meanwhile the Nasdaq 100 allows some international names.
This’ partly because this Nasdaq index doesn’t include any financial companies, such as banks or life insurance firms, prioritising tech and growth sector stocks.
One example is Shopify. A Canadian firm which has a dual listing in the US allowing it to qualify for the index. Cambridge headquartered Arm Holdings is a UK example of this, having floated on the Nasdaq in 2023.
The S&P also has strict thresholds for market value ($14.5 billion minimum), liquidity (or how easy shares are to buy and sell), and profitability.
While they have some differences both indices’ performance is driven by a very narrow set of stocks. Largely the Magnificent 7: Meta, Alphabet, Amazon, Apple, Microsoft, Nvidia and Tesla.
This is because they’re weighted by market value, meaning larger companies have a much higher representation and thereby greater impact on the performance of the index, meanwhile smaller companies have less of an influence.
The Mag 7 boast market values in the hundreds of billions and even trillions and means that they account for 30-40% of these indices alone, even the ‘broader’ S&P.
Working out what is being tracked
Looking at the most popular ETFs and it’s typically clear from the names which indices they track it’s harder to discern for the majority of the tracker funds. And it’s a crucial factor given the performance varies by some margin depending on what they tracked.
The most popular one – UBS S&P 500 Index – is obvious but the HSBC UK American Index Fund also tracks it even though it is not referenced in the name of the product.
The Vanguard US Equity follows the S&P Total Market Index (TMI) and the ‘total market’ element means it will also cover mid, small and microcap stocks, as well as large cap.
The Legal & General US Index Trust and Fidelity Index US Fund are outliers, following the FTSE USA Index and S&P 500 (NUK) Index, respectively.
FTSE is the UK’s version of the S&P and this benchmark is designed for use in the creation of index tracking funds, derivatives and as a performance benchmark.
The S&P 500 (NUK) Index prioritises limiting volatility over returns, designed to keep the index’s ups and downs to around 15% per year. It’s specifically designed for use by risk-controlled funds.
While not affiliated with any of the 10 funds here, it’s worth mentioning the Dow Jones Industrial Average index.
It’s often mentioned alongside the S&P 500 and Nasdaq in terms of coverage and attention.
Comprising of just 30 stocks, the Dow Jones is price-weighted rather than equal weighted like the others and covers all industries except transportation and utilities. It tends to have a more modest representation for the tech sector than the Nasdaq or S&P 500.
In a price-weighted index, stocks with a higher share price have more impact on the index movement, regardless of how big the company actually is.
Anyone joining this market train at a late stage in a major bull market are likely to lose money. One course of action would be to have funds ready to invest when the market turns down. The market may continue up for a while but be wary of a black swan event. Until then keep re-investing those dividends in your Snowball in line with the number of years you have to start spending those dividends and therefore your risk tolerance.
How I could live off dividend income alone!
Dr James Fox explores whether it would could be possible to generate enough dividend income to live comfortably and stop working.
Posted by Dr. James Fox
Published 30 May, 2023 11:28 am BST
Like many investors, I receive dividend income from the stocks I own. In my case, dividend-paying stocks represent the core part of my portfolio. But just how much would I need to earn from dividends to live off this income alone? And would it be possible?
Let’s take a close look.
How could it work?
Well, I’d want to build a portfolio of dividend stocks that collectively pay me enough money to live from. Let’s say this is £30,000, but I appreciate this might not be possible in London.
And I’d want to be doing this within an ISA wrapper. That’s because any capital gains, dividends, or interest earned within the ISA portfolio is tax-free.
So, if I was earning £30,000 from dividends, I’d actually be taking home more money than someone on a £45,000 salary — including student loan repayments.
Of course, unless I picked specific stocks, I wouldn’t expect this income to be spread evenly across the year. At this moment, the majority of my portfolio’s income comes around April and May, shortly after the end of the financial year. So that’s something to bear in mind.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
What would it take?
Well, to earn £30,000, I’d need to have at least £375,000 invested in stocks. That’s because I believe the best dividend I can achieve is around 8%. This would involve investing in companies, like Legal & General, that don’t offer much in the way of share price gains.
But what if we don’t have £375,000? And let’s face it, the majority of us don’t.
Well, I’d need to build a portfolio over time. And I could do that using a compound returns strategy. This involves reinvesting my dividends and earning interest on my interest. It’s very much like a snowball effect.
Naturally, there are several key variables here. The starting figure, the yield I can achieve, and the amount of money I contribute from my salary every month.
If I started with £10,000 and stocks yielding 8%, in theory I could reach £375,000 in 19 years. But this would require me to contribute £400 a month and increased this contribution by 5% annually throughout those 19 years.
And by contributing £400 a month, I’d fall way under the maximum annual ISA contribution of £20,000.
Compound returns isn’t a perfect science, and as with any investment, I could lose money. But it’s certainly safer than investing in growth stocks.
About the stocks
Of course, the above is great in theory, but I’d need to pick the right stocks. I’m looking for stocks with strong dividend yields, but I also need to be wary. Big dividend yields can be a warning sign, and the dividend coverage ratio is a good place to start.
Let’s do a one eighty turn and look at the opportunity from the opposite angle, concentrate on the tail and not the body.
You may only have 10k of seed capital but it’s still the Snowball effect where your income roughly doubles every ten years.
So10k would earn income of £1,286, after twenty years £2,572 and after 30 years £5,144. A yield of 51% on seed capital. You have to allow for inflation but you could also add capital to your Snowball.
