Tuesday, 29 March 2011

High-Yield PIBS (UK)

PIBS are Permanent Interest-Bearing Shares or special shares issued by building societies that pay a fixed rate of interest. They cannot (usually) be sold back to the society but can be bought and sold on the stock exchange, which means the price varies. PIBS from the demutualised building societies are known as perpetual sub-bonds (PSBs).

PIBs therefore are similar to a commercial bond, which is the component of Level 7 of the DIY Income Investor Income Pyramid.

What makes them attractive is the current high yield offered - partly as a result of some recent defaults.

Monday, 28 March 2011

The Pick of the 5% Dividend Yield Club (UK)

The Budget's 5 Most Important Changes for DIY Investors (UK)

As a DIY Income Investor, one of my priorities is to avoid paying any kind of tax, as far as possible. Not that I don't want to contribute my fair share - but I really don't want to pay more than my share!  For that reason the annual Budget is always important, as it announces short-term changes to tax rules - but also indicates for the future where the Treasury's thinking on tax raising is going.

And this budget - in particular - has been a bit opaque; some of the 'small print' is only now emerging in discussions in the press (e.g. This is Money's article on how the Budget will affect families). So, apologies for coming back to slightly old news; but here are what I think are the 5 most important changes - and what these might mean for the future.

Wednesday, 23 March 2011

BM Savings Inflation-Linked Bond (UK)

Fixed rate savings form part of Level 3 of the DIY Income Investor's Income Pyramid
 
Savings bonds with a return linked to inflation may help to maintain the purchasing power of your savings. For UK savers, since the withdrawal of National Savings & Investments' index-linked certificates in July 2010, there have been few index-linked options (although the recent 2011 Budget announcement means that they will be back.
 
However, does the new inflation-linked bond from BM Savings fit the bill?

Tuesday, 22 March 2011

Portfolio Buy: ETF iShares Markit iBoxx £ Corporate Bond ex-Financials (ISXF) - UK

As a way of documenting the DIY Income Investor approach I am posting information about my new investment decisions - we will then track the portfolio of new purchases so that you can see how they work out over time.

These are real purchases - this is not a 'fantasy' portfolio.

All my purchases will be on the London Stock Exchange, using a Self-Select Stocks & Shares ISA.

This purchase is an Exchange Traded Fund (ETF) with the rather complicated name iShares Markit iBoxx £ Corporate Bond ex-Financials  with the stock market ticker symbol ISXF.

Monday, 21 March 2011

Portfolio Buy: ETF iShares FTSE UK Dividend Plus (IUKD) - UK

As a way of documenting the DIY Income Investor approach I thought it might be useful to post about my new investment decisions - and then to track the portfolio of new purchases so that you can see how they work out over time. These are real purchases - not a 'fantasy' portfolio.
All my purchases will be on the London Stock Exchange, using a Self-Select Stocks & Shares ISA.

The first purchase is an Exchange Traded Fund (ETF) called iShares FTSE UK Dividend Plus with the stockmarket ticker symbol IUKD.

Friday, 18 March 2011

DIY Income SiPP (UK)

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The DIY Income Investor approach involves shielding savings and investments from the taxman. In the UK, there are two main ways to do this:
  • an Individual Savings account (ISA)
  • a Self-invested Personal Pension (SiPP)
They are both quite similar to operate for the DIY Investor but they have different implications for tax and access to your money.

This post gives some basic information about SiPPs - what they are, how they work and how to find a suitable one.

Thursday, 17 March 2011

ISA or SiPP? (UK)

The DIY Income Investor approach relies on shielding savings and investments from the taxman. In the UK, there are two main ways to do this:
  • an Individual Savings account (ISA)
  • a Self-invested Personal Pension (SiPP)
They are both quite similar to operate for the DIY Investor but they have different implications for tax and access to your money.

Student Loan - More Like a Student Tax! (UK)

Having teenagers, who will hopefully progress in their studies to University, means that the costs of fees and living expenses for them is part of my overall DIY Income Investor expenditure plan for the future.

However, the current Student Loan proposals make me mad! What was quite a fairly generous 'loan' has morphed into a huge - potentially life-long - tax, with possibly penalties for paying back the loan early! So not only do the students (and parents) have to pay higher fees but they also get taxed to do it. This is a long way from when the government actually paid you to go to University with a grant!

Wednesday, 16 March 2011

How Much Is Enough?

The objective of The DIY Income Investor is to build up your wealth, reasonably quickly and reasonably safely. However, there is a valid question: How much is enough? What figure should you be aiming for?

Monday, 14 March 2011

Build Up Your Income Pyramid - Level 1: A Firm Foundation

The basis of The DIY Income Investor approach can be summed up as the Income Pyramid, which consists of different layers of income, using different asset classes.  The foundation of this pyramid is Level 1:  tackling your debt, including and paying off your mortgage. This is obviously a major hurdle for many people - and one that may take some time to achieve (it did for me).

This is not to say that you cannot begin to experiment with some of the different income-producing assets in the higher levels of the Income Pyramid - just that your focus needs be to on paying off debt.
 

Friday, 11 March 2011

Build Up Your Income Pyramid - Level 7: Corporate Bonds

Developing the theme of the The DIY Income Investor, we finish building up your Income Pyramid by moving up to Level 7 - buying Corporate Debt, in the form of corporate bonds, preference shares and other similar securities (including, in the UK, Permanent Interest-Bearing Shares and Enhanced Capital Notes).

These securities should sit preferably within a tax-shielded internet brokerage account.


Build Up Your Income Pyramid - Level 6: High-Yield Dividend Shares

Developing the theme of the The DIY Income Investor, we finish building up your Income Pyramid by moving up to Level 5 - buying  high-yield dividend shares, preferably within a tax-shielded Internet brokerage account.

Build Up Your Income Pyramid - Level 5: Government Bonds (Treasuries, Gilts)

Developing the theme of the The DIY Income Investor, we carry on building up your Income Pyramid by moving to Level 5 - buying  government bonds (or 'gilts' as they are known in the UK), preferably within a tax-shielded Internet brokerage account.


Wednesday, 9 March 2011

Build Up Your Income Pyramid - Level 4: Exchange Traded Funds

Developing the theme of the The DIY Income Investor, we continue building up your Income Pyramid by moving up to Level 4 - buying an Exchange Traded Fund (ETF), preferably within a tax-shielded Internet brokerage account.

When to Sell a Dividend Share? (Updated)

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Owning high-yield dividend shares is Level 6 of the DIY Income Investor Income Pyramid and can generate a growing income stream. Generally speaking, I would recommend a 'buy and hold' approach to dividend shares - but there are times when you will have to intervene and sell - I just have.

Having said that, selling shares is one of the hardest judgements to get right - so here are some observations to consider.

Monday, 7 March 2011

Build Up Your Income Pyramid - Level 3: Fixed Rate Savings

Developing the theme of the The DIY Income Investor, we continue building up your Income Pyramid by moving up to Level 3 - opening a fixed-rate savings account ('money market' account in the US).

In Praise of Dividends (UK & US)

Level 6 of the DIY Income Investor's Income Pyramid is investment in high-dividend-yield shares. (I should stress that this is for more experienced investors who have worked their way through the previous levels.) 

History shows that returns on equities are made up primarily of reinvested dividend income. The 'case for dividends' has also been made in numerous academic and financial research articles.

Thursday, 3 March 2011

Build Up Your Income Pyramid - Level 2: 'Easy Access' Bank Account


Hopefully you have understood by now what we are about here at the The DIY Income Investor, now let's get to the interesting stuff -  building up your Income Pyramid.

Level 1 was the sound foundation of no debt and paying off your mortgage - discussed here (and no easy task, either).

Instant 25% Return (UK)

Who wouldn't want to make an instant return of 25% on part of their savings? Not everyone can, that's for sure - but I just have. Of course, it will come as no surprise that you will need to be a DIY Income Investor - in spirit, at least.

Here's how...

Wednesday, 2 March 2011

Extreme Saving - 50 Things Not to Buy

Many people reading DIY Income Investor may be thinking: "it's all very well talking about how to invest money - but I haven't got any!"

As we underlined in 5 Steps to Maximise Your Wealth Potential NOT spending money is actually pretty fundamental to getting your Money Snowball rolling. What you don't spend you can save - and a penny saved is a penny earned (a bit more actually, if you paid tax on your income!)

So this post is a challenge (to me) to list 50 things that you don't need to spend your money on - let's see how far I can get... Follow me if you want to challenge your expenditure mind-set! It may seem a bit extreme - but hopefully you will be able to adopt a couple of the suggestions and bank the savings!