Buy for income and reinvest it – and the funds that help you do that

Should you buy an active fund, a tracker, or perhaps a 'smart beta' mix of the two? David C Stevenson investigates.

Should you buy an active fund, a tracker, or perhaps a 'smart beta' mix of the two?

Dividends matter. Depending on the decade you pick, they account for anything from 30%-90% of long-term returns from shares. Payouts are also a lot less volatile than share prices, because managements try to avoid cutting them.

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FTSE 100-9.7%2.9%8.6%11.8%Row 0 - Cell 5
iShares FTSE UK Div Plus (IUKD)-6.9%13.3%25.6%26.4%5.20%
SPDR S&P UK Dividend Aristocrats ETF (UKDV)-7.1%8.3%19.4%n/a4.50%
Vanguard FTSE UK Equity Income index Inc-9.4%4.2%12.5%22.7%4.43%
Active unit trust peers/benchmark
Trustnet UK Equity IncomeRow 5 - Cell 1 15.1%38.3%56.2%Row 5 - Cell 5
PFS Chelverton UK Equity IncomeRow 6 - Cell 1 22.5%68.6%105.8%2.40%
Unicorn Equity IncomeRow 7 - Cell 1 20.1%63.6%108.6%3.50%
Trojan IncomeRow 8 - Cell 1 19.1%41.2%77.3%3.69%
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Total expense ratio (TER)0.29%0.4%0.3%
Yield*5.9%5.2%4.5%
Number of stocks1035030
Sector cap25%No cap (35%+ financials)30% cap
RebalanceAnnualSemi-annualQuarterly
DistributionQuarterlyQuarterlySemi-annual
* Trailing 12 months measure of dividend yields, using the index level at 02/09/2015
David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.