How to find active fund managers that are worth paying for© Getty Images

The active versus passive debate has been raging for the past two decades. The biggest issue with active funds is fees. No investor should pay higher fees for sub-par performance. Still, if managers can outperform – earning their fees and then some extra – it is a good deal for investors.

However, it is difficult to dispute that passive funds beat active ones on average over the long run. The S&P Indices Versus Active (Spiva) reports from S&P Dow Jones consistently show that active funds have lagged behind relevant benchmark indices over long periods. Among US-based large-cap US equity funds, 64% have underperformed the S&P 500 over the past 24 years. In Europe, 93% of funds underperformed the S&P Europe 350 over ten years, while 82% of UK funds have lagged behind the S&P United Kingdom BMI.

The Morningstar active/passive barometer uses a slightly different approach of comparing active funds with passive funds in the same category, since this takes account of the reality that passive funds are not a perfect, cost-less replication of an benchmark index. Still, the results are very similar. Just 14.2% of active funds based in Europe beat passive strategies over the past ten years. Again, for large-cap equities, active fund performance has been particularly poor, making it “increasingly difficult to justify their higher fees”.

So the key is to find the areas where active managers still have the edge. For example, Morningstar notes that small-and mid-cap equities all saw active managers perform better: for example, 33% of managers investing in US small caps and 36% of investors in eurozone small caps beat passive peers.

This is still not a majority of funds. However, at least it suggests that investors are less likely to be wasting their time looking for an active manager who can add value here. So there is a stronger case for using active funds tactically in particular markets or sectors.

One of the latest features is the active/passive fund comparison: a daily-updated page that tracks how active funds are performing relative to their passive counterparts.

The data only currently stretches back five years, but there’s a ten-year screener in the works.

The results suggest that there is no point in investors trying to seek outperformance with an active manager in well-covered markets. For example, in the global large-cap sector, the platform has 258 active funds with a track record of five years, compared with 65 passive funds. On average, the median net total annualised return for the active funds is 8.6%, compared with 11.5% for passives.

More surprisingly, be careful in emerging markets – an area where many investors believe that active managers can readily succeed because markets are less efficient. The platform has 40 passive funds and 201 actives in the emerging markets equity category. Yet the actives have still underperformed passives by 0.17% annualised (on a median basis) over the past five years.

In the least-efficient markets, the odds may start to improve. The six active funds focusing on Africa and the Middle East have outperformed the one passive fund by 3.95% annualised over five years, on average. Active funds focusing on India have outperformed by 2% annualised, while those in frontier markets (ten active funds and two passives) have outperformed by 4.3% annualised. Similar trends can be seen in other categories that involve more small caps and in specialist markets such as biotech and alternative energy.

This article was first published in MoneyWeek’s magazine

Brett Owens

Chief Investment Strategist

Contrarian Income Report

Dear Reader,

You’ve no doubt heard pundit after pundit say that you need at least a million dollars to retire well.

Heck, we’ve all heard it so often, I bet it’s the first number most people think of when someone says “retirement savings”!

Let me explain why this endlessly repeated fallacy is dead wrong. You’ll actually need a lot less than that.

I’m talking about just $600,000. And in some parts of the country you could easily do it on less: a fully paid-for retirement for just $500,000.

Got more? Great. I’ll show you how you can retire filthy rich on your current stake.

I know that sounds ridiculous in these inflationary times, but stick with me for a few moments and I’ll walk you straight through it.

The key is my “8% Monthly Payer Portfolio,” which lets you live on dividends alone—without selling a single stock to generate extra cash.

And you’ll get paid the same big dividends every month of the year – so that your income and expenses will once again be lined up!

This approach is a must if you want to quickly and safely grow your wealth and safeguard your nest egg through the next market correction, too!

This isn’t just a dividend play, either: this proven strategy also positions you to benefit from 10%+ yearly price upside potential, in addition to your monthly dividends.

That’s the Power of Monthly Dividends

We’ll talk more about that price upside shortly. First, let’s set up a smooth income stream that rolls in every month, not every quarter like the dividends you get from most blue-chip stocks.

You probably know that it’s a pain to deal with payouts that roll in quarterly when our bills roll in monthly.

But convenience is far from the only benefit you get with monthly dividends. They also give you your cash faster—so you can reinvest it faster if you don’t need income from your portfolio right away.

More on that a little further on. First I want to show you…

How Not to Build a Solid Monthly Income Stream

When it comes to dividend investing, many “first-level” investors take themselves out of the game right off the hop. That’s because they head straight to the list of Dividend Aristocrats—the S&P 500 companies that have hiked their payouts for 25 years or more.

That kind of dividend growth is impressive. But here’s the problem: these folks are forgetting that companies don’t need a high dividend yield to join this club—and without a high, safe payout, you can forget about generating a livable income stream on any reasonably sized nest egg.

Worse, you could be forced to sell stocks in retirement—maybe even into the kind of plunges we saw in March 2020 or throughout 2022—just to make ends meet.

That’s a nightmare for any retiree, and leaning too hard on the so-called Aristocrats can easily make it a reality: the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), which holds all 69 Aristocrats, still yields just 2% as I write this.

Inefficient Markets Help Us

Bank $100,000 Annually (per Million)

Fortunately for you and me, the financial markets aren’t 100% efficient. And some corners are even less mature and less combed through than others.

These corners provide us contrarians with stable income opportunities that are both safe and lucrative.

There are anomalies in high yield. In an efficient market, you wouldn’t expect funds that pay big dividends today to also put up solid price gains, too.

We’re taught that it’s an either/or relationship between yield and upside – we can either collect dividends today or enjoy upside tomorrow, but not both.

But that’s simply not true in real life. Otherwise, why would these monthly payers put up serious annualized returns in the last 10 years while boasting outsized dividend yields?

For example, take a look at these 5 incredible funds that pay monthly and soar:

This is the key to a true “8% Monthly Payer Portfolio” – banking enough yields to live on while steadily growing your capital. It’s literally the difference between dying broke and never running out of money!

But I’m not suggesting you run out and buy these funds.

Energy infrastructure companies will provide a lift for your portfolio

Story by Stacey Morris

Energy infrastructure concept sustainability© Getty Images

Midstream energy infrastructure is especially well-positioned to benefit from rising demand for natural gas, particularly through liquefied natural gas (LNG) exports. North American LNG-export capacity is expected to more than double by 2030. Meanwhile, America’s demand for electricity is climbing for the first time in nearly 20 years (driven by electrification and data centres), boosting natural gas-fired power generation.

The Alerian Midstream Energy Dividend UCITS ETF (LSE: MMLP) is an exchange-traded fund offering exposure to US and Canadian midstream firms. Roughly 65% of MMLP’s index by weighting is focused on natural gas infrastructure.

Profits in the energy infrastructure pipeline

Williams is also pursuing natural gas power projects to support data centres. Scheduled to start up in 2026, its Socrates project in Ohio for a data centre belonging to Meta is backed by a long-term, fixed-price power purchase agreement. Williams has two similar power projects under development. Williams recently raised its forecast for this year’s adjusted EBITDA by $50 million. The company expects adjusted EBITDA growth of 9% in 2025 and raised its dividend by 5.3% earlier this year.

Canada’s TC Energy (Toronto: TRP) handles approximately 30% of the natural gas consumed daily across North America. It spun off its liquids pipeline business last year, and now natural gas pipelines represent 90% of the company’s expected 2025 EBITDA. With robust growth opportunities, TC Energy expects to notch up C$6 billion-C$7 billion annually in capital expenditure. For instance, the company recently announced the Northwoods pipeline project to support power generation in the US Midwest, including for data centres. It is expected to come online in 2029.

TC Energy expects comparable yearly EBITDA growth of 5%-7% from 2024 through 2027. The company expects C$10.8 billion in comparable EBITDA for 2025, which implies 8% growth. TC Energy boasts a 25-year record of dividend increases and anticipates 3%-5% annual dividend growth over the next few years.

Also worth researching is Cheniere Energy (NYSE: LNG). It liquefies natural gas for export. The company is expanding its export capacity at Corpus Christi, a key gas port, and expects to sanction an additional expansion project this year. EBITDA is expected to expand by 9% growth in 2025.

Cheniere has been the clear leader in terms of buyback activity in the midstream sector, repurchasing $5.5 billion of equity since 2022. Cheniere had $3.5 billion remaining on its repurchase authorisation at the end of March. The company has also prioritised dividend growth, committing to raising its payout by about 10% each year through to the end of this decade

This article was first published in MoneyWeek’s magazine.

The Bank of England’s Bank Rate is coming down more slowly than perhaps many anticipated, the economic outlook remains murky and the twin threats of online retail and hybrid working continue to place additional pressure on the business models of some Real Estate Investment Trusts (REITs). But another bid battle for a property play, this time between Tritax BigBox (BBOX) and private equity giant Blackstone (BX:NYSE) for Warehouse REIT (WHR), suggests there is value to be had here.

We have already bagged a bid for CARE REIT and should be a beneficiary of the fight for Assura (AGR) between Primary Health Properties (PHP) and KKR (KKR:NYSE). In this context, the discounts on offer to net asset value per share (NAV) at British Land (BLND), Derwent London (DLN), Shaftesbury Capital (SHC) and Town Centre Securities (TOWN), which range from 24pc to 52pc, still feel like they merit patient support, even if the foursome operate in different areas of the property market compared to Warehouse REIT and Assura.

Lower interest rates and improved economic activity could both help, while a growing number of REITs, including bid target Assura, Safestore, Custodian Property Income, Sirius Real Estate and British Land, are also starting to show signs of stabilisation, or even renewed increase, in net asset value (NAV) per share. The discounts are starting to close in some cases, and any further merger and acquisition activity could accelerate that process.

Questor says: hold
Assura (AGR): 50.1p
British Land (BLND): 381p
Derwent London (DLN): £20.50
Shaftesbury Capital (SHC): 151.8p
Town Centre Securities (TOWN): 139.0p

Analysts are hopeful the tide is turning on the beleaguered sector

Published on July 1, 2025

by Holly McKechnie

For the first time in a long time, there is some positive news on the investment trust discount front. 

Over the past three months, the average investment trust discount has started to narrow, having reached new highs in April following the tariff turmoil. Analysts are hopeful that this trend will continue.

Several factors are behind this shift. In part it has been driven by increased investor confidence, as markets bounce back following April’s dip.

“The market has seen increased buying interest for investment company shares and we think it is fair to say that a market rally ‘floats all boats’,” Stifel analysts Iain Scouller and William Crighton said.

Broadly the discounts narrowing are reflective of the movement of major indices during this period.

However, other factors have also had an impact. Share buyback programmes, prevalent across the sector since interest rates started to go up in 2022 have, up until now, had limited success in addressing the average discount.

In part, this was because the sector average was unduly impacted by the alternative asset trusts as these tend to trade on bigger discounts. But thanks to the slow implementation of share buyback programmes this is beginning to change, analysts said.

“Buying back stock when you’ve got assets that are quite illiquid is hard,” James Carthew, head of investment company research at QuotedData, said. However, alternative asset trust boards have begun to make some progress, which is reflected in the narrowing average discount. 

“They have rejigged the way that those funds work so that they have cash available to fund buybacks, which has been a long, slow, painful process, but a lot of them are doing it now,” Carthew added. 

Investors’ Chronicle

Increased M&A activity has also helped to narrow the average investment trust discount. In June, for example, Downing Renewables & Infrastructure Trust PLC (DORE) accepted a £175mn bid from Downing Estate Planning, while earlier this year BBGI Global Infrastructure (BBGI) received a £1bn takeover bid from British Columbia Investment Management. 

Again, this trend has been most pronounced in the alternative assets subsector, particularly in relation to property trusts, with bidding wars for both Assura (AGR) and Warehouse Reit (WHR) under way. 

Kamal Warraich, head of fund research at Canaccord Wealth, argued that the current uptick in M&A is set to accelerate. This could “further reduce discount rates, as investors prefer more liquidity and lower fees, both of which come with greater scale,” he said.

A rise in activist activity across the investment trust sector has also had an effect, with Saba’s interventions earlier in the year being the most high profile example of this.

While shareholders rejected Saba’s proposals for the seven investment trusts it targeted, its actions did prompt the trust’s boards to introduce new measures in response. 

For example, Schroder UK Mid Cap (SCP) has introduced an active buyback policy as well as a management fee reduction. Meanwhile, European Smaller Companies (ESCT) has enacted a sizeable tender offer. CQS Natural Resources Growth & Income (CYN) has also put forward a tender offer, as well as proposing the introduction of a higher dividend and decreased management fees. 

New activist players have also cropped up during this period, including Achilles Investment Company (AIC), which was launched earlier this year by seasoned activists Chris Mills and Robert Naylor. The trust is primarily targeting funds in the property, renewable and infrastructure sectors. 

Meanwhile, more established activist trusts have also stepped up the pressure.

“AVI Global (AGT) has, for ages, been buying stakes in private equity funds. But it’s shifted from just investing in funds with wide discounts, to investing in funds with wide discounts and trying to do something about it. It changes the mindset of it,” Carthew said.

Finally, falling interest rates have also had a positive effect on investment trust discounts. In particular prompting interest in investment trusts “with relatively high yields such as UK equity income, infrastructure and renewables,” Scouller and Crighton observed.

How to invest £200 a month in UK shares to target a £42,050 second income

Let’s face it, all of us would probably benefit from a second income, especially a tax-free one. Dr James Fox explains the formula.

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 

Investing £200 a month can be a powerful way to build wealth and target a substantial second income. This is especially true when we harness the power of compounding.

Compounding means investors earn returns not just on their original investments, but also on the returns those investments have already generated. Over time, this “interest on interest” effect can accelerate growth dramatically.

Slow and steady

If anyone consistently invests £200 every month and achieves an average annual return of 10% over the long run, the portfolio could grow to over £841,000 in 36 years. Yes, it takes time, but the longer we leave it, the faster it will grow.

The maths behind this is rooted in the compound interest formula, where each year’s gains are added to your principal, so the base for future growth keeps getting larger. 

After 36 years, an investor could look to allocate their portfolio towards companies with paying dividends or simply buy debt. With a 5% annualised yield, an investor would receive £42,050 annually. And that’s tax-free.

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.

Don’t lose money

The above is great. However, none of this matters if investors make poor decisions and lose money. Protecting capital is just as important as seeking high returns. As Warren Buffett famously says, “Rule number one is never lose money. Rule number two is never forget rule number one”.

This is crucial because a large loss can be devastating. If a portfolio falls by 50%, it needs a 100% gain just to get back to where it started. That’s why it’s wise to focus on quality companies, ideally with strong balance sheets and sustainable dividends, and to diversify investments across sectors to reduce risk.

Investing wisely

Move over gold ! Here’s how investors can hunt fallen FTSE shares and aim for an early retirement

UK investors can leverage the low valuations and strong dividends of FTSE shares to help bring their retirement closer. Dr James Fox explains.

Posted by Dr. James Fox

Published 2 July

MRO

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.Read More

With gold prices near record highs, investors should be looking elsewhere for long-term wealth creation. And the FTSE is probably one of the best place to look.

Today’s UK stock market is packed with fallen shares trading at low valuations. Many of these pay generous dividends. For those with patience and discipline, this environment offers a rare chance to harness the power of compounding and potentially accelerate the path to early retirement.

Opportunity in the UK

The FTSE 100 is forecast to deliver over £83bn in dividends in 2025, up 6.5% from last year. Many blue-chip stocks, such as British American Tobacco, Phoenix Group, and M&G, offer yields of 8% or more. This can be great for compounding.

What’s more, many UK stocks have simply been trading sideways since the end of the pandemic. Legal & General, for example, is up 16% over five years, but is essentially flat against the end of the pandemic.

Low valuations also provide a margin of safety. When quality companies trade at discounts to their intrinsic value, the risk of permanent capital loss falls and the potential for share price appreciation rises.

This is particularly true for firms with strong cash flows and resilient business models, such as National Grid and Legal & General, which have maintained or grown dividends through challenging periods.

Of course, risks remain. Dividends are never guaranteed, and some high yields may reflect underlying business challenges. However, a diversified approach will likely allow investors to harness the FTSE’s unique blend of value and income.

Here’s how a modest monthly investment of £200 could grow at 10% annually.

A potential turnaround

Melrose Industries (LSE:MRO) could be seen as a fallen FTSE stock. While peer Rolls-Royce has surged 1,000% to new highs, Melrose shares have moved sideways or even declined. The aerospace manufacturing stock is actually down 15% over eight years.

This divergence with Rolls is striking given Melrose’s robust fundamentals. In 2024, adjusted operating profit rose 42% to £540m, and the dividend was hiked by 20%. Yet, the market focused on short-term disappointments, such as lower-than-expected free cash flow and revenue slightly missing forecasts, rather than the company’s ambitious five-year growth targets and improving margins.

Melrose trades at a forward price-to-earnings (P/E) of just 14.1. That’s far below Rolls-Royce (34.8) and other aerospace peers, despite its balanced exposure to both civil aviation and defence, and its technology being present in over 100,000 flights daily. 

The company is targeting high single-digit annual revenue growth and expects free cash flow to quadruple by 2029. If Melrose delivers on these targets and investor sentiment shifts, the shares could re-rate sharply, closing the gap with sector leaders.

However, risks remain. Net debt has risen to £1.3bn, and ongoing supply chain constraints could pressure margins or delay growth. Nonetheless, for those willing to look past short-term volatility, Melrose offers the rare chance to buy a quality FTSE business at a discount.

This is a stock I’ve been adding to my portfolio, and I think it deserves broader consideration.

Kikma kikma.sitex ekunkamra1979@gmail.com 84.129.148.134

Adding shares to the watchlist is a great way to keep track of potential investments. It’s important to remember that this doesn’t mean they’re a buy recommendation. Always do your own research and assess the security of dividends before making any decisions. Additionally, consider factors like the spread and premium, as they can significantly impact your investment. What steps do you take to ensure a share is worth investing in? Recently, I came across a program for GPT-generated text (генерация текста) in Russian. The cool part is that it runs locally on your own computer, and the output is actually unique and quite decent. By the way, I hope the content on your site isn’t AI-generated?

What steps do you take to ensure a share is worth investing in ?

The only consideration is the yield, better if the share trades at a discount but do not overlook ETF’S that may not.

Check the history of the company dividends, a small cut or a hold is acceptable if it’s a high yielder.

Check any news from the company referencing the next dividend and any guidance for the future dividend policy. Anyone with a lower risk tolerance could research any dividend heroes, which normally pay a lower dividend yield and buy if/when the market next crashes. That’s about it and follow the rules.

2 dividend shares to consider in July to target a £1,200 passive income
The dividend yields on these UK shares are among the largest to be found on either the FTSE 100 index or the FTSE 250 right now.

Posted by Royston Wild
Published 29 June

SUPR
UKW

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more.

Though the FTSE 100 and FTSE 250 remain on prolonged bull runs, many top UK shares continue to offer great value. The environment is especially attractive for investors seeking high-yield dividend shares to buy.

Here are just two great dividend stocks with sky-high dividend yields to consider:

Supermarket Income REIT (LSE:SUPR) 7.3%
Greencoat UK Wind (LSE:UKW) 8.6%

Of course dividends are never guaranteed. But if broker forecasts prove accurate, a £15,000 lump sum spread equally across these companies will provide a near-£2k second income over the next 12 months alone (£1,193 to be exact).

I’m confident too that each of these dividend shares will steadily grow the passive income they deliver over time. Here’s why.

Supermarket Income REIT
As a real estate investment trust (REIT), this business is set up to deliver a consistent stream of dividends to shareholders. At least nine-tenths of profits from their rental earnings must be paid out each year under sector rules.

Supermarket Income owns and lets 81 stores to the stable grocery industry’s big beasts like Tesco and Sainsbury. This ensures a steady flow of income that’s not vulnerable to changes in the economic cycle.

As you may expect, the business is mindful of the growth of online retail and the threat this poses to future property demand. According to Statista, online penetration rates for food and other groceries in the UK have more than doubled since 2016.

Consequently, the company’s investment strategy is focused on so-called omnichannel stores that “provide in-store shopping, but also operate as last mile, online grocery fulfilment centres for both home delivery and click and collect“. This helps to greatly reduce (if not totally eliminate) the threat of click-based shopping.

I’m more concerned about the impact of future inflation on the business. A subsequent pickup in interest rates could dent earnings and pull its share price sharply lower again. But I feel the potential rewards of owning the REIT’s shares outweigh this danger. Annual dividends have risen each year since it listed on the London stock market in 2017.

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.

Greencoat UK Wind
Renewable energy providers like Greencoat UK Wind, on the other hand, have a rapidly growing market to capitalise on. The climate’s especially favourable in the UK, with the current government putting Net Zero among its policy priorities.

For dividend investors, this fellow FTSE 250 REIT has other attractive qualities. Due to the stable nature of electricity demand, cash generation isn’t impacted by broader economic conditions like many other UK shares. What’s more, its revenues are essentially guaranteed by long-term contracts with energy suppliers.

This has resulted in annual dividend growth that, except for last year when payouts were frozen, goes back to when the company joined the London Stock Exchange in 2013.

That’s not to say Greencoat UK Wind isn’t without risk, of course. Like that other REIT I’ve described, profits are sensitive to interest rate changes. With just 49 wind farms on its books too, it doesn’t enjoy technological diversification that can protect earnings when the wind doesn’t blow.

That said, on balance, I think its other safe-haven qualities — allied with that 8%+ dividend yield — make it worth serious consideration today.

Remember, your portfolio should be different to the above, to reflect you risk profile and how many years you have to retirement. If your retirement date is in the distant future, you maybe willing take on more risk as you have time to repair any damage if you buy a clunker. GL