I had intended to write about something else this month.
Specifically, as I mentioned last month, I’d intended to look at the relative costs and merits of a selection of income-centric investment trusts.
Instead, I’m going to cover a different topic. Because while last month’s article was still fresh and gathering comments, I received a very unwelcome e-mail from a friend.
Another friend, David, had earlier that day collapsed and died on his farm.
Six months younger than me, David was one week short of his 60th birthday, and – I’d say – a fit and active person with a healthier lifestyle than your correspondent.
And now he’s gone.
RIP, David.
Re-thinking investment management
Frankly, it’s been something of a wake-up call [1].
Here at Greybeard Towers, my wife has been more than happy to leave the investment decisions to me.
Left-leaning and with a degree in Latin and Ancient History, she’s preferred to delegate investing matters to someone who a) enjoys them, and b) has academic qualifications that are – as she sees it – at least more relevant to modern-day investing than a degree in Latin.
No longer. Mrs Greybeard has now finally been introduced to her long-standing SIPP [2], and has made a couple of trades1 [3]. She also now understands a little more about where all our collective investments are, in terms of which platforms [4] and providers, and how much is invested where.
Still to come: why specific investments are where they are.
Further down the line, she obviously also needs to know what to do with those investments if I suddenly pass away, leaving Monevator readers sadly sobbing into their portfolios.
Trackers vs. Investment Trusts
Some of this, I’ll admit, was in my mind as I read the comments on last month’s article [5], in which I described how I was gradually transitioning my SIPP portfolio away from low-cost trackers [6] and towards income-centric investment trusts.
Especially so in the case of those comments decrying income-centric investment trusts [7], and advocating various passive strategies – ETFs, trackers, and so on. And specifically, those posts that were advocating going all-out for a total return approach, where in retirement we’d gradually sell off our capital in order to generate an income.
That is fine as long as the investor in question is mentally competent enough to handle the administrative burden associated with periodically pushing the ‘sell’ button to generate funds with which to pay the bills.
But this can’t be taken for granted, as I’ve seen at first hand, close to home, within my own family.
Old age [8] and potential infirmity comes to us all.
Hence – to me at least – the attraction of a set of broadly-based, well-diversified investment trusts, which reliably deliver an income [9] to your bank account, without the investor needing to do much more beyond simply spending the dosh.
Peace of mind
There’s a price to pay for this, to be sure. Even a low-cost investment trust [10] has a management fee that is several times that of an ultra-competitive tracker.
And to those of you who argue that your passive-based strategies will almost certainly generate a higher overall total return, I’ve only one thing to say: I agree.
But the primary purpose of any investing return in retirement is to pay the bills [11]. And it seems prudent to acknowledge that those bills need to be paid, whether you’re mentally competent enough to manage your investments or not.
Moreover, it also seems prudent to arrange to pay the bills for your surviving spouse or partner, should you die before them.
Especially if that surviving partner has shown no previous interest in investments.
So that’s the situation I’m trying to address. For being male, with a (slightly younger) female spouse, I don’t need an actuary to tell me that the odds are fairly reasonable that I will go first.
Facing forwards
What to take away from all this? Chiefly this: that pleasant fantasies about reaching your mid-80s [12], and then passing your spouse a sealed envelope containing advice or instructions about what to do after your death are exactly that – pleasant fantasies.
In reality, the Grim Reaper can arrive much sooner.
Much, much sooner.
And so I shall continue to gradually transition my SIPP portfolio into income-centric investments, believing that in doing so I’m addressing two risks.
- One, generating an income if gagadom strikes.
- Two, leaving my spouse with a straightforward means of redirecting that income to her own bank account should I suddenly keel over.
But to be frank, there’s another reason, too.
The last thing I want is for her to be faced with a situation so unmanageable that she calls in a smart-suited ‘adviser [13]’, who might persuade her to switch the whole lot into some ghastly under-performing fee-laden ‘product’.
Meaning that having out-smarted the investment professionals in life, I can continue to do so in death, too.
- Knowing that I was going to write about her, Mrs Greybeard predicted I’d do so in a sexist and patronising manner. So there’s no need to write a comment telling me this – it’s a message I’ve been hearing for 35 years. [↩ [18]]