Follow momentum, not yield for income in 2014

UK equity income

David Urch, manager of the TB EEA UK Equity Market fund, explains why investors need to diversify portfolios beyond the defensive approach taken by the majority of income funds.

As the average age of the UK population rises, income generation is becoming more important for many investors. Traditionally equity investors seeking strong, consistent yield have built their portfolios around large-cap, defensive, income stocks. But, as can also be observed in much of the fixed income universe, there are arguably asymmetric risks in this strategy, which may threaten to lead to ultimate disappointment. Yield should be seen not as a target, but as a useful by-product. It is more important to find companies with positive operational momentum, which are growing their...