Investing For Income

[@Pensioncraft]

If you're interested in learning more about investing then why not become a PensionCraft member? Pensioncraft.com members can enjoy lots of benefits, so to find out more about these and how to join our friendly community please click here www.pensioncraft.com/investor-education/membership/

[@GenExDividendInvestor]

Thanks for the info. My motto has been to consistently invest in quality companies over the long term and you should do fine. I’ve created my own personal pension with dividend stocks, but there are lots of ways you can generate real wealth carefully. Chasing yield invariably will burn you.

[@pixelmasque]

how does chasing yield burn you? (here to learn)..

[@GenExDividendInvestor]

@@pixelmasque Companies with too high of yield (like 5%+) are often high because they are risky -- perhaps the stock has fallen hard. What I look for is consecutive years of strong dividend growth with a low starting yield... Then you still get your high yield, but it takes a bit longer, and you are in a quality company. Companies that have consecutively increased their dividend for 25 years+ are called dividend aristocrats, and those that have done it for 50+ years are the rare dividend kings. Make sense?

[@Pensioncraft]

Hi GenExDividendInvestor if you buy single companies with high dividends you take a very significant risk, as you say. However, indices composed of hundreds or even thousands of stocks or bonds are less risky because you get some diversification. But there's no way of generating higher return without taking _some_ risk. That's why I spend so much of the video discussing risks. Thanks, Ramin.

[@GenExDividendInvestor]

@@Pensioncraft Yes, totally agree! After investing for multiple decades I think I've made most of the mistakes out there, but I'm sure there are more to be made ;)

[@monabri7387]

@@pixelmasque Essentially nothing is for free - a high yield generally comes at a high risk. Sometimes the yield on offer can appear attractive simply because the share price has fallen (a lot) and one has to ask oneself the reasons why the share price has fallen and - more specifically, will it recover? Answering these questions is the difficult bit!

[@PassiveIncomeTom]

Great work! Investing for income seems to make more sense than investing for growth stocks. That's why I like passive income from stocks and real estate.👍

[@Pensioncraft]

Hi Passive Income Tom I agree - income is great! Thanks, Ramin.

[@letsdanceonhere]

Love your teaching style! Thanks Ramin.

[@Pensioncraft]

Hi Da Masky thank you! Ramin.

[@user-ww6ii6zn8m]

Thanks for sharing, there's a ton of value here! I'm mostly invested in growth stocks but making money from dividend investing is definitely a great strategy!

[@Pensioncraft]

Hi Sam, thank you! Ramin.

[@AlexBrock]

Another well explained and informative video. Thanks Ramin.

[@Pensioncraft]

Hi Alex, thank you! Ramin.

[@charugera7654]

Excellent video. Can you do an update video for 2020/2021?

[@25Soupy]

2008 correlates with the retirement of the baby boomers. A demographic shift from working to retirement. A shift from paying/putting into retirement to withdrawing/taking out money for retirement.

[@johnhaug1747]

Suggest retirement portfolio be designed to generate more dividends than current cost of living amounts. EG, if median annual cost of living is 23000 pounds sterling, then design portfolio to do 50000* pounds sterling. Go ahead and use the 23000 pounds sterling annually, and recycle the difference to buy more portfolio stock(s). This should more than offset inflation, which the Fed targets ~ 2-3% under normal circumstances, and allow for greater inflation adjusted future distributions. *50000 is just a guess for illustration purposes, end users will have to iterate their own specific value to match their comfort zone(s).

[@mmabagain]

Ramin, what are your thoughts on the Vanguard Wellesley Admiral fund for income for a soon to be retiree?

[@step2424]

Great video. Have you used interactive investor as a platform? I wondered what your opinion on that platform was?

[@luxushauseragency]

This is exactly why our customers are hungry for income generating real estate.

[@Pensioncraft]

Hi Luxus I agree there's definitely a demand for income generating assets at the moment. Thanks, Ramin.

[@paulmolyneux9503]

How does currency hedging actually work. Does it make use of derivatives and if so does that add a counterparty risk?

[@Pensioncraft]

Hi Paul, usually it involves a derivative called a currency swap. And yes, that produces a counterparty risk although it's with an investment bank. The risk from the fund itself will be much greater than the risk from the swap. Thanks, Ramin.

[@tc9634]

Yes but the hedging counterparties tend to balance say, a £1b fund buying $ assets hedged back to £, with a ~$1.3b fund in the US holding £ assets hedged back to $. The contracts tend to be short term. Vanguard have told me for their hedged funds they generally hedge with multiple counterparties and limit each counterparty to hedging 5% of any given fund. if a counterparty fails all that happens is you become exposed to currency fluctuations on the portion of the fund they were hedging. Think of it like turning vanguard us gov bond index fund hedged, into the unhedged VUTY us treasury bond etf

[@NYProfessional]

Lovely video, cheers! Can you point to something similar for the American consumer?

[@Pensioncraft]

Hi NY Professional, the income landscape is global so if the dividend yield is high in sterling it will almost certainly be high in US dollars. The individual funds by which you get exposure to each market will be different, however. For example, if you want exposure to US high yield corporate bonds you'd have to find the cheapest trackers on, say, ETFdb e.g. etfdb.com/etfdb-category/high-yield-bonds/ The ETFdb website also has a list of EM sovereign bond funds. The risks are slightly different so, for example, US dollar investors benefit from the fact that there are many more US dollar funds than GBP funds so currency risk isn't so much of a concern unless the fund buys foreign currency assets which are unhedged. You can always call me for a quick chat to discuss this ramin.as.me Thanks, Ramin

[@tc9634]

US total bond market and see if you can buy a $ hedged UK equity tracker. If you take the currencies fluctuations away the UK and us have performed similarly since 1945.

[@Machevort]

Good video, but you really got those yields wrong. For example, VUKE yields ~4.8% (3.6% in your video) and VUSA yields ~1.6% (1.2% in your video).

[@bartlomiejwrx4537]

where to start any course that could be recomended for a compleate begginer.

[@Pensioncraft]

Hi Bartlomiej I have lots of courses for just £5 on my website which are for beginners. pensioncraft.com/courses-we-offer/ The PensionCraft community is also a great place to learn with others patreon.com/pensioncraft and here again I've priced it so that anyone can join. Thanks, Ramin.

[@badass6656]

Technical analysis is good as always but you did not mention the actual yields for the different investments. You also did not mention the different type of risks. You implied risk is proportional to volatility but for seasoned investors they may be considering chances of default if it is a bond or dividend cut if it is a stock.

[@Pensioncraft]

Hi Bad Ass the brightly coloured bar plots show the yields of a wide range of funds and the dividend yield / volatility plots show them again. I mention the risks at the end of the video (duration risk, credit risk, currency risk). I have a whole video about the different types of risk "Investment Risk Management" kzbin.info/www/bejne/fn62dn-ZraqdpMU That's a good point about dividend being cut for single stocks but I only discuss whole indices here where the dividend payments tend to be fairly stable. Thanks, Ramin.

[@Nicosazu]

Great video. Thank you!

[@Pensioncraft]

Thank you Nicolas! I'm pleased you enjoyed it. Ramin

[@christopherhoward1556]

This is a great video, many thanks for sharing. I am looking for EUR denominated yields and would like to adjust the tool you are using from 10:15 onwards, is this a public tool?

[@Pensioncraft]

Hi Christopher I use the statistical language R and the ggplot package to generate the plots. Thanks, Ramin.

[@christopherhoward1556]

@@Pensioncraft Great, thank you.

[@OilTrading]

Keep in mind you don't have to just invest by purchasing, you can also short stocks and make a great deal of money. I play the market both ways. I just made $69,000 two weeks ago by shorting the Dow Market for two days.....

[@ChrisMorrisseyInvest]

That's an incredibly foolish thing to do, not shorting, shorting the Dow!

[@tc9634]

no you didn't

[@mohamednizam8527]

just wanted to know which broker platform you use to do analysis and/or trade?

[@Pensioncraft]

Hi Mohamed you'll see I've got a Vanguard ISA account. For analysis I use the free & open source statistical package R. That's how I make most of my graphs. Thanks, Ramin.

[@awolgeordie9926]

Excellent.

[@Pensioncraft]

Hi AWOL Geordie, thank you! If you want to learn more I've priced the membership so cheaply that anyone can afford it, and you get to ask your own questions patreon.com/pensioncraft Thanks, Ramin.

[@jc.1191]

I'm curious what anyone's thoughts are for the return of UK bank dividends?

[@LondonReps]

Great video as usual, thanks :)

[@Pensioncraft]

Hi LJSE thank you! Ramin.

[@daveforgot127]

Interesting video but what do you say now after the coronavirus in Crash. What country you're financially unstable in the west and the number one being possibly America. Sounds like we're all screwed

[@lorea4749]

what about investing in Gold or gold ETFs?

[@tc9634]

Gold isn't an investment it's a currency.

[@MuninnsBeak]

according the vanguard website VUKE (in ETF format) has a yield of 4.7, what do you think is the cause of the discrepancy btw the ETF and the fund? i know the fund only pays out annually whilst the ETF pays out quarterly and hence the stated yield might be more up to date, but thats just a guess.

[@Pensioncraft]

Hi MuninnsBeak VUKE is a fund so I'm not sure what you mean when you say there's a discrepancy between the ETF and the fund. There will be a daily variation in the dividend yield because it's defined as income over the last year divided by price, and price can fluctuate minute by minute. But the index (the FTSE 100) dividend yield and the fund dividend yield should be very close in value. Thanks, Ramin.

[@MuninnsBeak]

@@Pensioncraft Money i put into the Vanguard ETF with the ticker 'VUKE' today will give me a dividend yield of ~4.83% assuming no one changes their dividend. Your video implied that money you put into the vanguard FTSE100 fund today (or recently) will earn you a 3.7% yield. I just wonder why there's a difference between the two yields in the vanguard's FTSE100 trackers when they're essentially the same product in different formats. maybe i'm just being dense. www.vanguardinvestor.co.uk/investments/vanguard-ftse-100-ucits-etf-gbp-distributing/distributions?intcmpgn=equityuk_ftse100ucitsetf_fund_link

[@tc9634]

They both buy the FTSE 100. If you go on ftserussell.com you can get the actual yield, currently 4.42% (select the FTSE 100 factsheet at www.ftserussell.com/index/spotlight/ftse-uk-index-series) The vanguard website shows you the yield that the FUND has paid out. Since Vanguards FTSE 100 index fund pays out annually, the yield is worked out as the last dividend payment divided by the funds current price. Whereas the actual yield Rob ftserussell is the amount of dividends paid by FTSE 100 companies over the last 12 months divided by the FTSE 100s current market cap.

[@colinpayne7496]

Something very wrong with the data sources, a 1% difference in yield between the iShares and Vanguard FTSE100 trackers, there’s a few more ....

[@Pensioncraft]

Hi Colin I use ShareScope as the source of my data for yields and price series. Thanks, Ramin.

[@TheSolarAge]

Hi What about UK individual stocks paying good dividends? BT.a, HSBA, CNA, ..

[@Pensioncraft]

Hi Piotr I don't ever buy single stocks because they're (a) too risky (b) they can cut their dividend overnight at the whim of the board whereas index dividend is more stable and (c) I don't have time to monitor the financial statements and annual reports for every company. Thanks, Ramin.

[@TheSolarAge]

PensionCraft Thank you for your response. Are there any founds that invest in dividend paying stocks and than pay the investors the dividends minus their commission? If yes, are they better for income than buying etfs and selling them slowly for income? I hope the question make sense.

[@tc9634]

@@TheSolarAge you can look on Hargreaves Lansdown for UK equity income or global equity income. Vanguard offer a UK equity income index fund but the yield of the FTSE 100 and FTSE all share is ~4.4% and 4.2% respectively and that's plenty. Vanguard offer an etf called vuke that buys that ftse 100 and pays out the dividends quarterly. This contains all those stocks you mentioned and a load more.

[@InvestingEducation]

I believe in longterm capital appreciation and delayed gratification

[@Pensioncraft]

Hi Investing Education personally I'm going for income while I keep my portfolio in a fairly low risk allocation. But once valuations look more attractive I'll change my focus back to capital gain. Thanks, Ramin.

[@AjitB07]

Hi just a quick question, i was looking to open a Vanguard life strategy fund or the target retirement fund. With all this talk of a correction or recession in 2020, would this matter much to me if i am in it for the long term (20-30 years)? or should i wait a little? I plan to initially do a 5-10k lump sum then the minimum each month.

[@tc9634]

Don't try and time the market, if you have money to invest you're better off just doing it. This channel has a video about lump sum Vs drip feed investing. People will always come up with excuses not to invest - recession, debt, Isis, Ian, trump, Brexit etc The world carries on, business carries on, the global economy will carry on growing, we're just in a debt bubble right now.

[@tc9634]

I spoke too soon.

[@gerry2345]

I like this vid.. Very interesting.

[@Pensioncraft]

Hi GerrysPlace that's great, thanks, Ramin.

[@yshkviswanatham172]

No use it so may times fail when they give it, it is big dream only ,no reality not coming so far .

[@tayebdamerji7240]

IMF Director General declared : "Our new analysis shows that if a major downturn occurs, corporate debt at risk of default would rise to $19 trillion, or nearly 40 percent of the total debt in eight major economies. This is above the levels seen during the financial crisis." How do you think we should prepare for such a scenario?

[@Pensioncraft]

Hi Tayeb, keeping an eye on spreads is a good idea. These are freely available from websites such as FRED. I also discuss this in the section on credit risk in my video kzbin.info/www/bejne/fn62dn-ZraqdpMU on "Investment Risk Management & Understanding". If you are concerned about an imminent pickup in default rates then you should keep away from high yield credit and sovereign debt. Thanks, Ramin.

[@tc9634]

If you're that scared keep your money in a bank account 🙄

[@Toryboy1807]

Flight to Sh.... 😂🤣

[@Pensioncraft]

8-)

[@cooper8t]

@@Pensioncraft Sorry Toryboy for leeching onto this comment, but I have a genuine question that I can't find an answer too for Ramin.. Is the US stock market in any similar position to Japan in the 1990's? If no or yes, why? Might be an interesting video?

[@mikki7522]

God damn these rates are shit. The only way you can get decent risk free return on your fiat is in the cryptocurrency market. No wonder Bitcoin is getting pumped up lol.

[@Pensioncraft]

Hi Mikki the key thing is the amount of risk you take to generate a return. That's what makes Bitcoin a gamble rather than an investment. Thanks, Ramin.

[@benjaminm39999]

I wouldn't prioritise high yielding bonds for income. I prefer Shares in companies with stable dividend, decent cash flow, and history of maintaining or increasing dividend for at least 10 years - Glonal Dividend Aristocrat ETFs and Quality income ETFS. Income investment trusts with enough revenue reserves to cover a year or more's worth of dividend payments at the current rate are also a good shout. And I like REITs (especially those with long term lease agreements) and infrastructure investment trusts (especially the renewable energy trusts that the government will most likely continue to subsidise). I'd also consider index funds that track utility and infrastructure stocks. All this may be more volatile, but the yield will likely hold up better. Personally I don't care about volatility. Volatility is fake risk. The only risk with it is that the investor will panic. I don't like REAL risk - the permanent loss of capital, and the risk of erosion by inflation. High yield debt is the most (real) risky asset class of all - defaults are permanent loss of capital, and inflation and debt monetisation can be used to wipe out your real returns. No more than 5% in high yield debt for me, and I wouldn't touch it unless durations were short.

[@tc9634]

I just stick with index funds - ultimate diversification and no thinking required.

[@michaelashcraft8569]

Investing? Do people really do that, and, what happens to people buying what the investor invests in? Who gets rich, who goes broke making Porsche/mansion payments?

[@fredost1504]

Youre incredibly wrong about how long we will have low rates. The real question is, how long will we have POSITIVE rates. Negative yields are coming. I predict 10 yr Treasury at 1% next year this time, and at 0 in 2021 latest. Governments have gone mad spending, and cant pay interest on debts that increase by trillions per year globally.

[@Pensioncraft]

Hi Fred, surely negative rates is still low rates? But I agree that there is too much debt combined with fiscal easing by the US and the UK. The appetite for government debt remains very strong, but at some point something will give. But I don't agree that governments can't pay it back, that's far from the case in the UK. The UK debt to GDP ratio isn't too high and it's falling because the economy is growing faster than UK debt as the ONS showed in the March release of its government debt statistics here www.ons.gov.uk/economy/governmentpublicsectorandtaxes/publicspending/bulletins/ukgovernmentdebtanddeficitforeurostatmaast/march2019 : "At the end of the financial year ending March 2019, UK general government gross debt was £1,821.3 billion, equivalent to 85.2% of gross domestic product (GDP) (Table 1 and Figure 1). This represents an increase of £57.5 billion since the end of the financial year ending March 2018, although debt as a percentage of GDP fell by 0.1 percentage points from 85.3% over the same period. This fall in the ratio of debt to GDP implies that GDP is currently growing at a greater rate than government debt." Thanks, Ramin.

[@tc9634]

Ok calm down and go back to wherever you got those ideas 😅