Volatility could bring switch to accumulation
Keith Churchouse, director, Churchouse Financial Planning
If you are investing in UK equity income now, yields are still reasonable. I appreciate that investors are going into this sector to produce income but there are concerns that the market is overheated now and if there was a correction they could find they lose capital even though their income is maintained at a reasonable level.
However, if there is a blip in the market, and I think it should be exactly that, any investors need to understand that there could be some volatility in the UK equity income sector over the coming months.
There are always the usual suspects in this sector that we recommend. Artemis Income fund is always a good performer and the Invesco Perpetual income fund is one we are recommending and you could also argue that you could go for the Invesco Perpetual high-income fund, which is another regular top performer. But we also think Neptune’s quarterly income fund is a good choice, which is technically an accumulation fund rather than an income fund, but it still does not do too badly.
Recent Investment Management Association UK equity income figures show that the income market is very volatile right now.
Investors are desperately seeking income and have been since the fall of deposit rates and the fall of equity markets, so it is not surprising there is volatility in the market but it is something that investors should be aware of.
Also, the way that equity values have climbed over the last six months may explain the volatility. I would not be surprised if many investors moved away from UK equity income to UK equity accumulation, if not capital growth, to try to swap from income to capital growth.