Investment Trust Dividends
The current 2025 target for the Snowball is income of around £9,000.00.
The comparison share VWRP
£145,282.00
Using the 4% rule income of £5,811.00
The gap between the two options should continue to widen especially when the next black swan event occurs.
The ‘4pc rule’ on pension withdrawals can be broken with the right investments
Ed Monk
If there’s a superstar in the world of retirement planning, it’s William Bengen. His “4pc rule” has helped countless people avoid running out of money in retirement.
Mr Bengen, an American financial planner, conducted a detailed analysis of a huge number of hypothetical retirement scenarios in a range of economic circumstances to arrive at his rule.
He found that even investors who retired at the worst possible time would be able to fund a 30-year retirement if they limited withdrawals to 4pc of their savings in the first year of retirement and increased them in line with inflation thereafter.
Some would be able to withdraw more each year, fund a retirement longer than 30 years or even leave at death a large sum to pass on to their children.
In the three decades since he published his original research, Mr Bengen has continued to refine his rule as further data was released, enabling him to improve his analysis. Much like Mr Bengen, those applying his rule should keep an eye on the markets and inflation to ensure their plan remains sustainable.
Here, Telegraph Money explains how to use it:
The rule is simple: if a retiree were to withdraw 4pc of their pension pot in the first year of their retirement and then increase withdrawals by the annual rate of inflation, their pension pot would last them no less than 30 years.
He modelled his rule from 1926 onwards, meaning that even accounting for “worst case scenarios”, such as the Wall Street Crash and Great Depression, the pot would not run out.
But with a further 31 years of refinement, Mr Bengen has discovered that savers can afford to increase their withdrawals if they plan appropriately.
His research relates to American investors, but the broad principles also should apply to the UK.
It states that if a pension pot is invested 50-50 between large-cap US stocks and US Treasuries, a saver can draw down their pot starting at 4pc. However, if they add a broader range of assets, including international stocks and smaller US companies, they can safely increase their withdrawals to 4.7pc of the initial pension pot.
pension drawdown
If you do plan to fund retirement from a pot of money invested partly in shares, your biggest fear may be a bear market. After all, pension providers allow you to look up the value of your pot every day, and in a bear market, that value will be falling, perhaps dramatically. In those circumstances, it may well feel reckless not only to maintain your withdrawals at a predetermined rate, but to increase them every year in line with inflation.
Advertisement
But when Mr Bengen looked at the figures, he found that the tendency of markets to recover was enough to prevent permanent damage to retirement income from a bear market in the early years of retirement, even at initial withdrawal rates as high as 7.2pc.
In a research paper commissioned by Fidelity International, he said: “Although bear markets can have painful effects on portfolios in the short term, they are usually followed by recoveries, which enable the portfolio to regain its former value and then some.
“The lesson here is that in the event of a ‘normal’ bear market in stocks, taking no action [i.e. maintaining withdrawals in line with the plan] might be the best strategy.”
He did, however, warn that this reassuring conclusion might not apply to particularly severe bear markets.
Recommended
Rather than bear markets, what retired investors should really fear is a severe or prolonged bout of inflation, Mr Bengen said. When he modelled the effects of such an inflationary period – specifically, 4.6pc in the first year of retirement and rising to 10.2pc in the seventh year, before a slow decline – for a saver who started with a withdrawal rate of 5.5pc, he found that the saver could not afford to just carry on with the planned withdrawals.
Doing that would result in the withdrawals quickly becoming unsustainable, putting the saver on course to run out of money well before 30 years had passed. In this scenario, what Mr Bengen called a “draconian” 28pc cut in withdrawals in the sixth year would be required to restore the plan’s sustainability.
He added: “How many of us could contemplate a 28pc reduction in withdrawals from our retirement accounts in mid-retirement?
“For many, it would be a severe blow. And, even given this harsh reduction, we can’t be sure it will be sufficient if inflation persists at a high level.
“This underscores the observation that inflation is the greatest threat to the lifestyles of retirees.”
We should emphasise that if the saver had instead stuck to the original 4pc rule and not opted for first-year withdrawals of 5.5pc, all would have been well.
Mr Bengen concluded: “A retirement withdrawal plan requires active management. Adjustments may have to be made during retirement, although not all deviations from the plan require immediate action.
“Bear markets come and go, and many can be safely ignored. However, high, sustained inflation may be the justification for panic.”
Recommended
Mr Bengen’s method for reassessing withdrawal rates might require a moment to understand but is simple in principle.
It involves the calculation at the start of retirement of what each year’s withdrawals will be as a percentage of the theoretical value of the pot each year, assuming steady inflation and investment growth at historically average rates.
You then compare, as retirement progresses, that hypothetical withdrawal rate with the actual one. The actual figure, calculated each year, is your actual withdrawal, in pounds, divided by the actual value of the pot at the beginning of that year.
The two withdrawal rates – the hypothetical and the actual – are bound to differ because variations in inflation will affect the amount you withdraw each year, while the value of the pot will, in practice, fluctuate from year to year in line with the financial markets.
It is this difference between the hypothetical and the actual withdrawal rates that you need to pay attention to. Small, brief gaps are nothing to worry about, but a wide and prolonged gap is a sign that withdrawals may be unsustainable.
Ed Monk is an investment writer at Fidelity International. Mr Bengen’s new book, A Richer Retirement: Supercharging the 4pc Rule to Spend More and Enjoy More, analyses more withdrawal scenarios.
I have decided to sell the holding in QYLP as other Trusts have fell so I can now get the same yield without the risk.
I will monitor some covered call ETF’s to see how they perform in a falling market and may return one day.
The runner and riders
| Author | OLaneDaype |
|---|---|
| fghsarlaVeiSp@gmail.com | |
| In response to | Chart of the day AEI |
| Submitted on | 2025/09/21 at 8:18 am |
| Comment | Heya are using WordPress for your site platform? I’m new to the blog world but I’m trying to get started and create my own. Do you need any html coding expertise to make your own blog? Any help would be really appreciated! https://keslaser.com.ua/vodinnya-v-doshch-i-tuman-yake-svitlo.htm |
Word Press Yes
No coding experience needed.
For investors starting from scratch, buying shares each month and reinvesting dividends could be a smart long-term way to earn a second income.
Posted by Stephen Wright
Published 20 September
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
Turning excess savings into a second income can be a very good idea. Even for someone starting from scratch, it’s possible to earn some good returns with enough time.
As things stand, someone in the UK aged 30 has 38 years before becoming eligible for the State Pension. And that’s a long time to build up an investment portfolio.
Historically, property has been a very good source of extra income for UK investors. But higher taxes and greater regulation have made things more complicated in recent years.
Enter real estate investment trusts (REITs). These are companies that own and lease properties (which might be hospitals, offices, warehouses, or other buildings) to tenants.
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.
In exchange for tax exemptions, REITs return 90% of their income to shareholders as dividends. And this gives investors a different way to earn income by investing in property.
There’s been a lot of interest in the UK REIT sector recently in terms of takeovers and acquisitions. But I think there are still some opportunities that are worth checking out.
When it comes to leasing buildings, supermarkets probably aren’t the first type of property that people think of. But Supermarket Income REIT (LSE:SUPR) is worth a closer look.
As its name suggests, the company leases a portfolio of around 55 supermarkets across the UK. And its largest tenants include Aldi and Lidl as well as Tesco and Sainsbury.
The nature of the grocery market means the firm’s tenant base is relatively concentrated. While its rent collection metrics are impressive, investors shouldn’t overlook this risk.
A 7.85% dividend yield, however, goes some way to offsetting the risk. And investing regularly at that rate of return for 38 years can have some impressive results.
Investing £100 each month for 38 years and earning a 7.85% annual return results in a portfolio that generates £19,293 a year. Starting from nothing, I think that’s a strong result.
The situation with Supermarket Income REIT might be even better. Since the majority of its leases are linked to inflation, investors might expect an extra 2% in annual rent increases.
There is, however, no guarantee the stock will trade with a 7.85% dividend yield every month for the next 38 years. If the share price rises, the equation could look very different.
In that case, investors aiming to turn £100 a month into something that eventually returns £19,293 a year would need to look elsewhere. But that might not be such a bad thing.
One of the benefits of regular investing is it allows for gradual diversification. Over time, different stocks come in and out of fashion for various reasons.
Buying each month should give an investor a chance to take advantage of different opportunities as they present themselves. And this creates a diversified portfolio over time.
For someone starting from scratch, buying shares and reinvesting dividends could be a good long-term strategy. And I think REITs are a good place to start looking for opportunities.
Investing £100 monthly for 38 years at a 7.85% annual return builds into something quite powerful thanks to compound interest. Let’s break it down:
📈 Investment Summary
19 September 2025
Downing’s Simon Evan-Cook and Orbis’ Alec Cutler explain why investors should be wary of a downturn.
By Patrick Sanders
Reporter, Trustnet
Equity markets have posted stellar returns over the past decade but extreme valuations and historical precedent indicate that this could be about to reverse, according to managers.
Alec Cutler, FE fundinfo Alpha Manager of the Orbis Global Balanced and Orbis Global Cautious Standard funds, said this is a concern that many investors have ignored.
“People seem to think that equities are guaranteed a positive return. They aren’t. They could absolutely make zero in the next 10 years,” he said.
It seems “realistic” that equity markets deliver nothing or even lose money, thanks to the dominance of US stocks, which make up roughly 70% of the MSCI World index.
Since 2011, the S&P 500 has delivered a “spectacular” average yearly return of 14%, but this is based on unsustainable expectations, according to Cutler.
“To produce 14% again, you need valuations to go from already extreme 24x [price-to-] earnings to almost 40x earnings. You need corporate earnings, profit margins and valuations, which are near record highs, to increase further,” Cutler concluded.
The far more likely outcome is that the US equity market corrects and drags the rest of the global market down with it, he said. The average annual return of the S&P 500 is around 7%, so to return to that level, equity markets would post an average return of zero for “at least the next 10 years”.
This may sound absurd, he noted, but it has happened before. The chart below shows the average expected return on equities over 10 years, from different market valuations.
Source: Orbis Investments
“If you look back in history as far as you can get, whenever we’ve been at this level of valuation, markets returned zero over the next 10 years,” the Orbis manager explained.
On top of this, the US government’s “financial mismanagement” in relation to escalating debt levels and investors pulling out of American markets (both bonds and equities) could lead to a weaker dollar. This in turn could fuel further capital exodus from the country, sparking a US downturn.
“I would not be shocked if you get a 0% return from the global equity market from here,” he concluded.
Simon Evan-Cook, fund of funds manager at VT Downing Fox, agreed that this is a realistic concern. “There’s no God-given right that equity markets will go up every year, let alone to go up for another 15 years in a row,” he said.
While the past decade has been “mostly sunshine and rainbows” for global equities, strong performance is causing investors to develop “worrying” assumptions.
For example, many investors have concluded that active funds are no longer needed due to their underperformance compared to a surging global equity tracker.
“I completely understand why some people are asking themselves if they need an active fund, given that any attempt to do anything different has underperformed,” the Downing Fox manager said.
However, he warned that these assumptions were also around in the 1990s and backfired on investors as, in the following decade, the average global equity tracker “made you nothing”, Evan-Cook explained.
Performance of funds post 2000
Source: Downing Fox. Total return in sterling
The tech bubble collapse in 2000 was due to the high concentration of US equities, which had outperformed and become overvalued. When they corrected, they represented 50% of the global market and so dragged most portfolios down.
As Evan-Cook noted, while current valuations are not at the 1999 peak, they are approaching it. And global markets have become even more dominated by the US than they were 25 years ago.
If North America stocks re-rate, the resulting crash might look closer to the Nifty 50 downturn in the 70s, he suggested.
Long-term valuations of US Equities
Source: Downing Fox. CAPE Ratio, January 1881 to August 2025.
“Hence why it’s not outrageous to suggest that something as apparently reliable as a global tracker could go a long time without making money,” he said.
Not even the most popular stocks on the market would be immune. For example, in 2000, some investors thought Amazon would thrive due to the emergence of the internet, while others thought it was overvalued and heading for a fall. “Both investors would have been absolutely correct,” Evan-Cook noted.
Amazon shed almost 92% of its value between 2000 and 2005, but those that sold missed the rebound, he explained. This could happen again to some of the biggest stocks in the index, “despite how transformative things like artificial intelligence are”.
“Broadly, equity markets do go up over time”, Evan-Cook said “, but they can spend long periods of time that matter to investors going sideways or down. That’s a real risk right now.”
However, he said this is mostly a risk for global equity trackers and US mega-caps, with the outlook outside of US blue-chips being much more positive, as seen in the chart below.
Expected 10-year returns of equity markets
Source: Downing Fox. Research Affiliates.
Maybe prudent to have part of your portfolio in dividend paying shares ?
Discover how holding a diversified range of UK dividend shares could generate a strong and stable passive income over time.
Posted by Royston Wild
Published 20 September
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
By some distance, Brits still prefer to hold cash on account for a passive income than to put their money in shares. To prove my point, latest data showed that 7.9m adults currently hold a Cash ISA, more than double the number that have a Stocks and Shares ISA (3.8m).
Given the spike in interest rates after 2021, it’s not a shock to see cash accounts have gained popularity. But with the Bank of England slashing their lending rates, continuing to prioritise savings over investing in the stock market could be an expensive mistake.
Investors have to balance risk and reward when deciding where to put their cash. And there’s no right or wrong answer, as it depends on each individual’s investment goals and risk tolerance.
But I prefer to put the lion’s share of my capital in dividend-paying stocks. By investing in a wide range of companies, too, I can mitigate the riskier nature of share investing versus saving, and chase a strong return without putting my money in too much danger.
Even if rates remain unchanged at 4%, the superior passive income that’s on offer from UK shares make stock market investing a ‘no brainer’ for me.
Here’s a mini-portfolio of seven UK stocks investors could consider putting their spare cash in:
| Dividend share | Sector | Dividend yield |
|---|---|---|
| M&G | Financial services | 7.9% |
| Greencoat UK Wind | Renewable energy | 9.8% |
| HSBC | Banking | 4.8% |
| Persimmon | Housebuilding | 5.5% |
| Target Healthcare REIT | Real estate investment trusts (REITs) | 6.2% |
| Pennon Group | Utilities | 6.6% |
| Chelverton UK Dividend Trust | Investment trusts | 8.6% |
The average dividend yield across these shares is 7.1%, which is triple the average interest rate of 2.3% that savers currently enjoy. Dividends aren’t guaranteed, but assuming these companies meet brokers’ forecasts — and can print a 3% average share price rise, too — I could enjoy a total annual shareholder return north of 10%.
Spread across 73 different companies, this mini portfolio could help protect investors against regional-, industry-, or company-specific shocks. The Chelverton UK Dividend Trust is especially effective in delivering this diversification.
The trust’s objective is “to deliver a high and growing income through investments in mid to small-cap companies exclusively outside the largest 100 UK stocks“. Concentrating on non-FTSE 100 stocks comes with greater risk, but it also provides the potential for superior rewards.
Besides, with investment in 66 different businesses across 20 different sectors, risk is still pretty well spread, in my opinion. Chelverton’s record of 14 straight years of dividend increases illustrates this robustness.
I’m not saying that investors should consider avoiding cash accounts altogether. I myself hold money in savings to diversify my broader portfolio and provide access to emergency cash.
But, for me, the best way to target a life-changing passive income is by putting most of my spare capital in dividend shares.
Story by Zaven Boyrazian, CFA
Long-term vs short-term investing concept on a staircase© Provided by The Motley Fool
Whenever the stock market hits a rough patch, investors often start nervously eyeing their portfolios. After all, there’s nothing more unpleasant than seeing investments crash in value.
So capitalising on these can propel portfolios to new heights, potentially opening the door to an earlier retirement.
Let’s take a trip down memory lane and explore the stock market at the height of the pandemic. When lockdowns were put in place, shares around the world tumbled. And here in the UK, even the FTSE 100, which has historically been quite resilient, dropped sharply by around 30% in March.
Yet those with their eye on the long term could have used this sudden drop to start snapping up shares at a massive discount. And even when relying on passive index funds, the results would have been tremendous.
The extra gains generated from investing during a volatile market environment have made a massive difference, even for investors following a strategy as simple as drip-feeding £500 into an index fund each month.
If you buy an index tracker and as long as you can choose when to sell, you will not lose any of your hard earned, it could be multi years though.
To buy when markets are week, you either need a safe part of your Snowball that you can sell, new funds to add to your Snowball, or dividends to re-invest at sale prices.
The Market is the only place where customers run out of the Store when there is a sale on.
WB
Snowball from Animal Farm
The current estimate for income from dividends for 2025 is £11,368.00.
When re-invested at 7% it should earn £795.00 in extra income.
The figure includes a special dividend from VPC and some December dividends could be received in the next financial year.
Fcast dividends for 2026 > £9,817, over halfway towards the end destination of a ‘pension’ of 13%.
Gilts are bonds issued by the UK government. In recent years, they have become increasingly attractive to individual investors due to increasing interest rates and tax efficiency.
Gilts are a type of government bond. When you buy a gilt, you effectively lend money to the UK government in exchange for periodic interest payments (coupons) and the return of your initial investment (the principal) when the bond matures.
UK government bonds are known as ‘gilts’ because their past paper certificates had gilded (golden) edges. The name also reflects their security and reliability, as the UK Government has never failed to make repayments.
Related: Investing for Beginners: How to Start Investing in the UK
UK Gilts Explained
This presents an opportunity for individual investors to buy them at a discount, and benefit from their tax-free capital gains when they mature.
For example, take a gilt maturing in 2026 with a low coupon of 0.125%:
This tax advantage makes low coupon gilts an efficient way to earn returns, especially for higher-rate taxpayers.
Gilts may be suitable for you if:
You can buy gilts through a broker, most investment platforms will offer gilts. You can also gain exposure to gilts through pooled products such as ETFs, however, pooled products will not be subject to the same tax treatment (free of capital gains tax).
Gilts have become an attractive investment for individuals due to recent economic changes and their tax efficiency. While they may not offer the highest returns, they provide a safe and predictable way to grow your money, especially in uncertain times.
If you are a higher or additional rate tax-payer looking for a low-risk investment that can help preserve and grow your wealth with high levels of tax efficiency, gilts might be worth considering.
Before investing, always review your financial goals and consult a professional if needed.
© 2025 Passive Income
Theme by Anders Noren — Up ↑
