10 years from the 2009 bottom: cash investors lose twice
Ten years ago two things bottomed out: the FTSE100 and interest rates.
At the same time as the FTSE100 hit 3512, base rates fell to 0.5%.
Master Adviser research reveals the best options for income, and it’s not cash
Mainstream investment trusts demonstrate they deliver both income and growth
Janus Henderson’s £360m Lowland Trust produced 12% for a 2009 investor with only 4% standard deviation
The research team at Master Adviser, the income specialist financial planners, has compared the income received from top investment trusts to interest from high street deposit accounts, using Santander as a proxy.
Starting with £50,000, cash interest to an income investor was £7,850 over ten years and the deposit remains at £50,000.
Lowland Investment Trust led the pack for income investors producing five times as much income, at £42,272, and has then turned the capital into £150,284
Cash interest for a 2009 depositor remains at 1.15%, but the income yield for a 2009 buyer of Lowland shares now sits at 12.27% (£6,136 on £50,000).
For a £50,000 income seeker from 2009 (31/12/2008) the figures are:
Other leaders were Murray International, Merchants Trust and the City of London, the latter having increased its dividend every year since World Cup Willy in 1966.
Master Adviser analyst, Adam Cortazzo, said:
“Our research goes back to the 60’s and 70’s to analyse who are the safest sources of retirement income for our clients. In addition to delivering income every year, the Top Ten trusts increased their income paid by an average of over 7% for each of the last ten years.”
Master Adviser investment director, Jim Harrison, IMC, said:
“For pension investors, reliability of the income is paramount, and City of London’s annual payout increases are actually less volatile than cash, with the standard deviation over ten years of only 1.2% - its increases are as predictable as clockwork.
“It is important to note that low interest rates are good for companies, enabling them to make more profit. Inflation average 2.1% per year from 2009, Lowland’s dividend increases averaged 7.38%.”
Master Adviser MD, chartered planner Doug Brodie, said:
“With SIPPs and drawdowns taking the place of annuities it is important that pensioners do not confuse share price volatility with income performance – these trusts having been paying income to pensioners since the ball started back in 1868 and investors should not be afraid of them in this low interest lifetime.”
Master Adviser is an award winning chartered financial planning firm based on Chancery Lane, specialists in income investing, managing £120m for retirees, mainly in investment trusts. The firm focuses on financial planning and uses liability matching strategies to provide the right income at the right time.
Income from investments is not guaranteed, and both income and capital values may fall as well as rise. Investments trusts use balance sheet reserves to support and smooth annual dividends.