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A balanced portfolio is vital when attempting to generate retirement income. The way in which you allocate your assets is also crucial.
It is recommended that investors diversify their investments between the four main asset classes:
- Cash
- Fixed interest securities
- Property
- Equities
By spreading your investments over the four classes, you help minimize risk while at the same time increasing your chances of a higher overall income return.
In line with this investment strategy, here follows several recommendations you should consider when looking to invest for your retirement income.
Fixed interest
M&G Optimal Income fund
The M&G fund invests across a wide range of fixed interest debt. Here the manager has the opportunity to invest in both UK and international markets, with a strategy that has seen high income and capital growth over the last few years.
The fund should also cope well with any volatility experienced from Fixed Interest in the future. The fund’s current income is 3% a year, paid half yearly.
City Merchants High Yield trust
The objective of the City Merchants fund is to obtain combined high income and capital growth from high-yielding fixed-interest securities.
The fund invests in various equity-like securities within fixed-income markets as well as equity-linked securities such as convertible bonds. Direct equities with high-income yield also form part of the portfolio. The fund currently has a yield of 6.2%.
Property
Henderson UK Property fund
The Henderson UK Property fund comes highly recommended as a core holding property fund. The investment strategy focuses on producing a strong income stream, and enjoys a yield of 4.5%.
The investment is in real bricks and mortar properties, prioritizing the selection of good quality properties with suitable tenants.
The geographical focus in the South East of the UK, providing a low overall void rate that in turn aids a consistent income.
Legal & General UK Property Trust
Investing in a range of commercial properties, the Legal & General Property fund helps provide an income while also offering the potential for long-term capital growth.
The fund is well diversified with a respected management team and currently pays a yield of 2.8%.
Equities
RWC Enhanced Income fund
The RWC fund is unique to most other UK equity income funds, in that it splits its revenue stream between investing in shares and selling options on those shares.
The result is the enviable position of a higher overall yield than most equity income funds available. At the end of 2013, the yield was an incredible 7%.
Fund managers also have the opportunity to invest oversees, further increasing potential diversification. Furthermore, the fund often has a higher than average cash weighting as the manager doesn’t invest unless he sees real opportunities.
Edinburgh Investment Trust
The Edinburgh Investment Trust has a competitive yield of 3.8%.
The fund is relatively conservative, and will only invest in companies quoted on a recognized UK stock exchange, including shares that are about to enter the FTSE All-Share Index.
The main focus of the fund is large and well-known dividend players. Holdings include; British American Tobacco, GlaxoSmithKline, BT and AstraZeneca.
Vanguard UK Equity Income fund
The Vanguard UK Equity Income fund invents by tracking the performance of the FTSE UK Equity Income Index.
Many of the companies within the portfolio have international reach, with much of the revenue and profits generated outside of the UK.These types of investments are often best accessed through passive or index tracking funds, such as the Vanguard Equity Income Fund.
With an above average yield of 4.4%, the fund comes highly recommended.
Global Equities
M&G Global Dividend
This fund has out-performed year in, year out in both rising and falling stock markets.
The rise of investors seeking global equity income exposure has seen the fund grow to over £6.5 billion in a little under five years.
The M&G Global Dividend focuses on producing a rising income stream. With a current yield of 3.1%, the fund has enjoyed success through seeking companies that show potential of growing their dividends over time.
Newton Global Higher Income
The fund prioritizes investment in large blue chip companies that have a history of paying steady rising dividends over the long term. What’s more, the majority of these companies generate their profits from global trade.
Therefore, if you are seeking exposure to global equities, this is a hard fund to beat. The income is currently 4% a year paid quarterly throughout the year.
Invesco Perpetual Global Equity Income
The fund’s strategy is to look for companies with attractive valuations, with the ability to sustain profit margins while delivering returns through the economic cycle.
The prospect of growing and sustainable dividends is also an investment factor. The yield is currently 2.7%.
