Lifestyle, Income Investing and Mr Micawber

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Your choice of investment style and lifestyle are intimately connected. For me, the logic of investing for income comes from a pretty simple mental model of the mechanism that money plays in my life.

This logic is not new - as Charles Dickens put it into the mouth of Mr Micawber over 150 years ago: essentially your financial success depends on your lifestyle, in particular the balance between income and expenditure.

A DIY Starter Pack of ETFs

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The two key problems that many new DIY Income Investors have are lack of knowledge/experience and limited financial resources, both of which mean that it is difficult to invest effectively and diversify properly. Diversification is most challenging in corporate bonds, which often have relatively large minimum purchases (e,g, over £10,000).

One way to deal with this might be to start by building up a DIY portfolio of income-oriented ETFs (and possibly one OEIC).

The QE Conundrum

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QE - or 'quantitative easing' - is a once-in-a-generation financial phenomenon: there is no remotely similar parallel to refer to in order to understand the potential consequences.

It started out as a bold (some would say 'last ditch') attempt to generate growth in the UK economy. And now, with sleight-of-hand accounting the Bank of England is transferring the income it has earned from QE back to the Treasury.

But how will it end? And what should DIY Income Investors do about it? Here's my best guess...

The Tail Does Not Wag The Dog

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Sometimes it is good to stand back to take in the big picture. 

As readers will know, high-yield dividend shares - bought on the London Stock Exchange (LSE) form a major part of the DIY Income Investor portfolio.

But here are two questions:

• what proportion of shares is owned by UK individuals?
• who owns more of these shares: UK pension funds or UK individual investors?