Are there funds for both drawing income and achieving growth simultaneously?

13 September 2017

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Question by Jon

I have just sold my house and have a significant sum of money I want to invest. I may want to draw some income but also want to achieve capital growth. Are there funds that aim to achieve both or should I just invest for growth and draw money as I need to for income?


Answered by Pete Matthew

Investing for both income and capital growth is possible (advisers call it investing for total return) but usually requires some compromise. If you go all-out for income, you are likely to limit the growth of the portfolio, whereas going all-out for growth will likely lead to a lower income being generated.

But that's OK! The best place to start is to define what you need out of this investment. If income is the priority, how much do you need, how long for, and when does it need to start? Begin with your goals and work from there to build a portfolio that aims to achieve those goals.

It's important to consider both the level of income and the capital value of the money. For example, if you need a higher level of income than the portfolio is likely to generate, you may need to dip into the capital. If you do this, how long will the capital last? What happens if you need to draw down from the capital when markets are dropping in value?

I suggest that you keep up to a couple of years' income in a risk-free bank or building society account, and give the portfolio chance to begin producing the income and capital growth you need. This will place a buffer between your income needs and a market decline, and enable you not to have to touch the portfolio if it is temporarily looking a bit sick. This might all seem a bit complicated, but with a bit of research it is possible for anyone.

Finally, there are funds which aim to do all of this for you (except for the cash buffer part). Look for funds with names that include the word 'income', but make sure that they include a spread of different kinds of assets and that the money is spread around the world, rather than just in the UK.

If in doubt, seek advice from a good financial planner, who will be able to help with both the cashflow planning part and the portfolio construction.

Answered by

Pete Matthew

Chartered Financial Planner

Pete is a Chartered and Certified Financial Planner and serves as Managing Director of Jacksons Wealth Management in Cornwall. He is also a prolific financial blogger and podcaster at MeaningfulMoney.tv with a desire to get decent financial information out to everyone who needs it.