SCOTTISH AMERICAN INVESTMENT COMPANY
/ DRAWDOWN /
“Many of the charities we look after aren’t 10, 20
or 50 years old, they are 100, 150 or 200 years
old and want to be around and as impactful in 100
years’ time as they are today”
16
110,000
THE POWER TO KEEP
GENERATING AN INCOME.
SAINTS (The Scottish American Investment Company) aims
to build up investment capital and generate an income that grows faster
than infl ation.
It focuses on three areas – growth, income and dependability. Our analysis
centres on the sustainability and long-term growth of a fi rm’s cash fl ow.
This naturally leads SAINTS to invest in high quality global companies with
strong balance sheets. The desired outcome is a dependable and growing
income stream alongside the prospect of capital growth. It’s a solution that
could be well suited to investors enjoying a long and happy retirement.
Please remember that changing stock market conditions and currency
exchange rates will affect the value of your investment in the fund and
any income from it. The level of income is not guaranteed and you may
not get back the amount invested.
100,000
90,000
80,000
For an investment that’s built to deliver a dependable income stream,
call 0800 917 2112 or visit www.saints-it.com
70,000
60,000
A Key Information Document is available by contacting us.
Long-term investment partners
50,000
So let’s assume you invested
£100,000 in the FTSE All Share
a decade ago – just before the
financial crisis hit – and took an
annual income of 3.9 per cent of
the total value of your portfolio at
the start of each year.
What is clear though for anyone
retiring today is that the poor
yields available from cash and
bonds mean the balancing act
between income and growth
assets will require a heavier skew
towards the latter than it has
done in the past.
A higher equity exposure means
that there will inevitably come a
point where you see a 2008-style
crash hit your portfolio, in which
event it is vital to follow another
phrase closely associated with The
Hitchhiker’s Guide to the Galaxy:
don’t panic.
FTSE All Share (£123,938.34)
120,000
SAINTS HAS GROWN ITS
DIVIDEND EVERY YEAR
FOR THE LAST 37 YEARS.
BALANCING ACT
130,000
WORST POSSIBLE START
has proved to be a sustainable
withdrawal figure over the past
118 years, there is no guarantee
that it will be sustainable over the
next 118.
£100,000 INVESTED IN FTSE ALL SHARE OVER 10YRS WITH
3.9% REMOVED AT START OF EACH YEAR
“This is exactly the sort of thing
that trips people up,” he continues.
“When you look at that it suggests
that in three of the past four
decades, there was a time when you
could afford to spend some capital
in addition to your income and it is
actually not historically what has
been the case. People are probably
looking to spend capital now
because yields are so low. But that’s
probably not a good idea from this
type of portfolio.”
This leads to another important
point – with yields across all
other classes so low, anyone in
drawdown may be tempted to
put everything in equities, using
a mixture of income and capital
sales to fund their lifestyle.
While equities should
outperform the vast majority of
other asset classes over the long
term, there will undoubtedly be
periods when markets crash. Such
events would have the largest
negative impact the earlier they
occur on a portfolio in drawdown.
TRIPPING UP
Data from FE Analytics
shows the original £100,000
investment would have been
worth just £67,338 by the start
of 2009 and your income would
have dropped from £3,900 to
£2,626.182 in the space of a year.
It wouldn’t have returned to its
original level – not adjusted for
inflation – until 2014.
However, the £100,000
you invested at the start of
2008 would have been worth
£123,938.34 10 years later – the
23.94 per cent increase only
slightly behind the 26.39 per cent
growth in the consumer prices
index over this time. Not a total
disaster considering you invested
at “the worst possible moment”.
Of course, past performance
is not a guide to future returns
and just because 3.9 per cent
someone with this model could
afford to spend 5 per cent of total
capital a year in perpetuity.
Source: FE Analytics
trustnet.com
Your call may be recorded for training or monitoring purposes. The Scottish American Investment Company P.L.C. is available through the Baillie Gifford
Investment Trust Share Plan and the Investment Trust ISA, which are managed by Baillie Gifford Savings Management Limited (BGSM). BGSM is an
affi liate of Baillie Gifford & Co Limited, which is the manager and secretary of The Scottish American Investment Company P.L.C.