complete newbie here needing advice on a group of shares I’ve chosen for a dividend investment portfolio.
I have a pension account with Vanguard which i use to invest in funds and ETFs but i wanted to start investing in individual shares for passive income. Plan to place all these stocks in an ISA wrapper on here and start small (money wise) and then re-invest dividends and add to monthly to build. Planning to hold the shares for long term as well (is this something any of you would recommend?).
Any help on whether investing in the following is a good idea would be much appreciated.
Doesn’t answer your question, but I would argue that you will see bigger and safer returns just putting a larger amount of capital into your ETFs under the tax free wrapper of an ISA.
If your planning on starting small, and will be taking money out of the account as passive income, you will be limiting your long term investment return two fold.
Consider the following:
£2000 in individual stocks, with some of them incurring Stamp duty fees etc …
VS a big investment of £20,000 in an ISA ETF bundle.
In 1st one, you could go up 100% return and only see profit of £2000.
2nd one you could get 10% return and see the same profit.
You will always have more risk on the individual shares, so the amount of money put to work may always be less than that you could comfortably put in an ETF.
Depends how much you have to invest. If you have £20,000 but only feel safe investing £2000, then you are better off investing the whole lot in an ETF. If you are ok with investing the whole lot right now, then stocks may outperform. Depends at that stage how astute your stock picking skills are VS the market performance.
Doesn’t answer your question, but sometimes the steady approach of ETF’s allow more money to be put to work with less concentrated risk.
your reply was really helpful and has me thinking.
This may sound stupid, but I thought i was reducing my concentration of risk by investing in 44 companies from difierent sectors/industries/regions etc. Would welcome any additional thoughts, if any, you had on that.
If you want to diversify, the best route is an etf. Either a whole market or through allocating money to specific sector ETFs. It’s actually pretty high risk only selecting one company out of each sector. If you have expertise in a sector then that’s a good place to buy individual companies, but I doubt you can select the top company or two in each sector
My first thoughts are that you have listed alot of shares. Not sure if you have the time to monitor every single one of them to make sure they are still paying out dividends. If not you may want to just buy ETFs that focuses on dividends
If you are looking for passive income, besides shares, you could also look at bonds or REIT as well.
Again if you do not have the time or inclination you can buy ETF bonds and REIT instead of individual bonds or REIT.
An advantage for looking at different passive income generating assets are that it gives you some diversification.
I’m invested in some whole market ETF’s and Index Funds through my SIPP. Do you also recommend allocating more money to ETF’s through an ISA/Invest account as well?
Thank you very much for your advice. My list above includes 14 REITs and my SIPP currently has a 25% bond allocation mainly weighted in UK and US. I’m nervous about increasing my bond exposure as I think the UK and US economy will recover and my understanding is my bonds will decrease in value when that happens(?)
My proposed portfolio above (should the companies continue paying around the same dividend yields) would give an average dividend yield of say 6%. However, taking into account what you say about the time it takes to keep abreast of such a big portfolio, do you by any chance have any recommendations for high paying dividend ETF’s that I should look at? Perhaps ones that have a good track record of paying around 5-6%?
I do not have a recommendation as such. But if you do a search of ETFs on this platform for “dividend” or “aristocrat”, you will come out with a list that covers the UK, US, Europe and Asia. There is even a Vanguard one.
Well tbh you might be right then, if this is a separate thing from your SIPP. But still, I wouldn’t focus on diversification, rather just finding good companies you know will do well, and use a little common sense to make sure you don’t out all your eggs in one basket, like investing in all REITS or something. But you might still want to consider using ETFs, depending on the level of risk you want to take. And is a good option for getting exposure to sectors you don’t have much knowledge of
I was thinking like 45% O, 45% STAG and the last 10% on things like big box or whatever it’s called. Ones that offer warehouse storage for Amazon and drop shippers.
Well I was going extreme, obviously I wouldn’t choose one lol. But yeah I’m big in realty and got just 1% allocated to STAG I think. Never looked much into the Bog Box one tbh
Honestly, me neither. I don’t hold it so I haven’t had a need. Was just a general idea towards what I’d research if I was actually going to go full REIT, which I won’t.
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