DIY Investor Magazine
/
2015 Issue
20
None of the investment companies that specialise
in debt has a sizeable allocation to what is termed
investment grade debt issued by companies that the
ratings agencies think are most likely to pay it back).
Some of these funds bump up their yields by offering
to take the first loss in the case that the borrower
struggles to repay all or part of its debt. Some of them
borrow money at low rates and lend at higher rates.
Recently funds have been launched that specialise in
so-called peer to peer loans. Some of these funds are
quite complicated and here a simple maxim applies,
if you aren’t 100% sure you understand what you are
investing in and the risks involved, stay well away.
If you are trying to put together a portfolio that can
generate an income for your retirement or build up a
nest egg with your ISA money, you can use the Quoted
Data
website to compare funds,
FUNDS LIKE THESE, WHICH INVEST MOSTLY IN SHARES
OF LISTED COMPANIES, CAN BE ATTRACTIVE BECAUSE
THE INCOME THEY GENERATE CAN GROW IN-LINE
WITH OR AHEAD OF INFLATION IF YOU HAVE ENOUGH
MONEY TO SPREAD YOUR INVESTMENT ACROSS A
NUMBER OF FUNDS, THEN YOU CAN AFFORD TO BE A
BIT MORE INVENTIVE
rank dividend yields and get useful information on how
they work too.
One thing to remember, investment trusts / companies
have a great advantage when it comes to consistency
of dividends, they can dip into their reserves to maintain
their dividends in bad years. This is not an option that’s
available to open-ended funds but it should help you
sleep easier at night.
