Introduction to the High Yield Portfolio

[grimer]

Thinking laterally and going back to basics perhaps a "pure" HYP as originally intended by pyad should be defined on here by the constituency of shares from which it is constructed? ie FTSE100 or probably more pragmatically FTSE350 (personally I use the Sunday Times "Top 200" companies) ie. anything containing shares outside of that pool - preference shares, VCTs, ITs, foreign listed etc. - be automatically deemed "impure" non-HYP. That should be clear and simple for all to follow, no?

It would be simple to follow in principle, but a substantial number of the HYPs posted on these boards to do not conform to that definition, but they are posted with good intentions and are constructed with the exact same objectives as Pyad's original HYP - i.e. a high initial yield via dividend income that rises over time. If some people are achieving that aim with the inclusion of a couple of high yielding ETFs, ITs, etc, that compliment their equity holdings, then I fail to see why they can't be made welcome on these boards.

I find the discussions on these boards very interesting and I've learned a lot from the people posting here. It is the disagreements and debates that draw out the knowledge. Othewise we might as well have Luni post a mechanical HYP each month and turn off the comments entirely - 'Pure HYP' was supposed to be a completely hands off method of holding shares - i.e. for eternity and preferably longer. There wouldn't need to be any debate, if this board were dedicated to pure HYP.

If people feel that the way to go is to split the board into a 'Pure HYP' and a 'Dirty HYP' then I'm happy to move to the dirty board.

[Lootman]

I find the discussions on these boards very interesting and I've learned a lot from the people posting here. It is the disagreements and debates that draw out the knowledge.

Yes. Back at Uni I never learned anything passively sitting listening to a lecturer. I'd just start daydreaming. But rather in tutorials where small groups of people basically argued with each other. If someone makes a statement, push and push them again. If their point stands and you lose the debate, you learn. If their point doesn't stand, then you win the debate (but learn nothing). It's the Socratic method.

Digression over.

Otherwise we might as well have Luni post a mechanical HYP each month and turn off the comments entirely - 'Pure HYP' was supposed to be a completely hands off method of holding shares - i.e. for eternity and preferably longer. There wouldn't need to be debate, if this board were dedicated to pure HYP.

Again, yes. Most HYP's look similar containing the same "usual suspect" large-cap UK names. Given that and the "never sell" idea, it's hard to see what there is to debate. Or why anyone would buy a HYP tipsheet or newsletter for that matter. But I digress again, slightly mischievously.

If people feel that the way to go is to split the board into a 'Pure HYP' and a 'Dirty HYP' then I'm happy to move to the dirty board.

Elegant phrasing and, for some reason, the idea of community-mandated purity invoked a memory of the very bad US film "Heathers".

So perhaps two boards - "Heathers' HYP" and "Doris's HYP"?

[Gengulphus]

Ultimately, this isn't the Pyad Appreciation Society* board. It is supposed to be a forum for the discussion of the practical implementation of a HYP. Excluding potentially rewarding techniques/asset classes just because they weren't mentioned in an article Pyad wrote fifteen years ago is bonkers.

The TMF board was supposed to be a forum for the discussion of running a HYP in practice, where "HYP" means what question 6 of http://boards.fool.co.uk/faq-the-purpos ... 48855.aspx says it does. Not exactly what you would like it to be, not exactly what I would like it to be, almost certainly not exactly what pyad would like it to be, indeed probably not exactly what any of the board's users would like it to be. But a compromise that was arrived at with some difficulty back when the board split was done in 2008.

To summarise that compromise as expressed in question 6, it was that a HYP should ideally be as follows, but with small deviations from that ideal not disqualifying a portfolio from being a HYP:

* It is run with the primary focus on income generation rather than capital value.
* The assets invested in are directly-held shares rather than anything else (including any significant cash, i.e. the portfolio is fully invested).
* They have high yields.
* They have some safety factors that suggest the dividend is at least maintainable and preferably growable.
* They are well-diversified.
* Voluntary selling is kept low enough that average holding periods in the several-years-to-decades range are expected.

That's not a "Pyad Appreciation Society" or "Pure HYP" definition - if it were, it would also at least strongly recommend pyad's brand of 'strategic ignorance', only having 15 holdings, and no voluntary selling beyond that done for admin reasons rather than investment reasons (*). Quite possibly other things as well that I haven't thought of offhand.

(*) The evidence that such sales are OK by pyad is in HYP1's record: it has sold voluntarily on three occasions, to simplify the United Utilities rights issue, to avoid getting a foreign shareholding out of the Abbey National takeover, and to avoid getting two tiny shareholdings (one of them foreign) out of Anglo American's demerger of Mondi.

Perhaps a new Pure HYP board could be set up? People pop in, make a lump sum investment, do a Doris and are never heard from again? Isn't that what we're 'supposed' to do?

Disregarding the ridiculous exaggeration of pyad's position (his "HYPersavers" article makes it clear that he doesn't insist on either only investing a lump sum or never looking at a HYP again), if sufficient people want such a board to make it viable, then yes, it can potentially be set up. But it would be a good idea for them to ask for the board they want to be added, not to try to grab this board and change it to suit their own preferences, thereby antagonising me and all others who like this board's topic as it is.

And likewise, perhaps a High Yield All-Assets Portfolio board could be added to suit you and those who agree with you - I would certainly have no objections as long as there were enough of you to make it viable and not just a waste of the volunteer time and effort going into this site. But again you'd do better just to ask for the board you want, not to try to grab this board and change it...

I am of course assuming that there are enough people like me who like this board's topic as it is - enough to make it viable and not just a waste of volunteer time and effort. I think there are, but I cannot currently prove it. If you like, I will conduct a poll or polls to judge interest in the various topics for boards in due course - but that will have to wait until polls are available on this site... If such a poll does show that there is little interest in this board's current topic, I will accept the board being taken over by some other topic - possibly broader, possibly narrower - without argument, and will then decide which of the resulting boards I want to read (if any). Otherwise, expect serious opposition to any attempt to take over this board!

One other comment is that I am saddened (though I'm afraid not surprised) by all the old arguments being resurrected at this point. What this site needs right now is time to bed in properly, rescue what valuable material can be rescued from the TMF boards and get a good volume of discussion going again on the boards' real topics. I fear it is not going to be given that time...

* I would like to clarify that i feel no animosity to Pyad, beyond ... This was something that I was prepared to indulge in 'his' gaffe, but we've moved to a shared space now. I think any ideas regarding 'ownership' have come to their natural conclusion and it is time for a fresh start.

You're suffering from a severe case of living in the past! The TMF HYP board being pyad's gaffe ceased in early 2008, when he originally left TMF, and by the time he returned in the spring of 2009, the board split had happened, with a number of his principles being abandoned or heavily modified in the process even on this, the stricter of the two boards topic-wise. He's never had 'ownership' of the board since, and indeed has only infrequently even posted to it - an average of about once per 10 days over the last 5 years.

Gengulphus

[Gengulphus]

For example, highly active trading of shares might be a way for you to make more money, so you'd like to hear about it? Fine, but I wouldn't

That clearly has nothing to do with HYP, though. ...

Clearly nothing to do with HYP as it is generally understood on this board, yes. But you want HYP to mean any portfolio of high-yielding assets, and for that meaning, it's not clear at all: if the shares being highly actively traded were all high-yield shares, the portfolio concerned would be a HYP by that definition.

And that's not all that hypothetical an example: for 3 years from late 1999 to late 2002, I ran a portfolio using a Value strategy that used high yield and some safety criteria to choose its shares, but traded them quite actively with the primary aim of making capital gains - not up at day-trading levels, but I typically looked at each share in it once per week with a view to selling, and would often sell within a few months or even a few weeks of buying. It did get a good amount of dividend income overall - but it not infrequently sold a holding before it had earned any dividends from it...

It would clearly be a HYP by your definition, and I could post weekly updates of it on the board if you got your way about extending what HYP means here. Whether you would like those updates, I don't know - but I can guarantee that they would seriously annoy many existing users of the board! Almost certainly you would have another board split on your hands before too long...

No, I'm not threatening to do that - I decided back then that it wasn't a strategy for me: it did quite well financially, especially in 2000, but it was too much like hard work when combined with a day job! But sooner or later someone would want to run a strategy along something like those lines on a HYP board that defined HYP your way.

Gengulphus

[Stonge]

I'm confused.

[grimer]

It would clearly be a HYP by your definition,

You're (deliberately?) misrepresenting what I've said. I'm simply suggesting that there are lots of people with the same investment philosophy (long term buy and hold of solid dividend paying stocks, etc) that should be made welcome on these boards. I don't think we should be closing out people, or their logic, just because they have mixed things up a bit with some ETFs or ITs. It is the objective that matters - i.e. dividend income from a diverse portfolio, with adequate safety criteria. There is more than one way to skin a cat.

[melonfool]

If you like, I will conduct a poll or polls to judge interest in the various topics for boards in due course - but that will have to wait until polls are available on this site...

Gengulphus

I think we're probably all a bit poll-shocked this morning!

Mel

[melonfool]

I don't think we should be closing out people, or their logic, just because they have mixed things up a bit with some ETFs or ITs. It is the objective that matters - i.e. dividend income from a diverse portfolio, with adequate safety criteria. There is more than one way to skin a cat.

But this board is not for all 'those' ways, it's for *this* way.

I have ETFs and ITs, but I don't consider them part of my HYP. Why not have this board as the original HYP and another for 'high yielding mixed portfolio'?

Mel

[Wizard]

I think some guidance is required. According to a post yesterday the plan was to remove HYP from the name of the board, but that has not happened. No idea if that was an oversight or deliberate change of plan. Personally I would like an opportunity to discuss high yield in a broad context, but equally have found some of the posts here by HYPers extremely enlightening and wouldn't want to lose that.

Terry.

[Gengulphus]

It would clearly be a HYP by your definition,

You're (deliberately?) misrepresenting what I've said. I'm simply suggesting that there are lots of people with the same investment philosophy (long term buy and hold of solid dividend paying stocks, etc) that should be made welcome on these boards. I don't think we should be closing out people, or their logic, just because they have mixed things up a bit with some ETFs or ITs. It is the objective that matters - i.e. dividend income from a diverse portfolio, with adequate safety criteria. There is more than one way to skin a cat.

No, I'm not misrepresenting what you're saying. Instead, you're missing the implication of what I'm saying, which is that you need to think properly about what you want to achieve, what needs changing to achieve it and what shouldn't be changed to avoid far more disruptive changes to what is discussed on the board. Simply saying "HYP" = "high yield portfolio" in the ordinary sense of the words is a much bigger change than is needed to allow mixing things up a bit with some ETFs or ITs. Indeed, no change at all is needed if it's just a few of them - the "A HYP strategy doesn't have to adhere 100% to these hallmarks..." part of the TMF FAQ allows some breaches of the "Holding shares indirectly via funds is not part of the strategy, due to the fund management fees - this includes not using investment trusts and ETFs (also known as iShares)" part. (And was intended to - at the time of the board split, some HYPers were stashing dividend cash away in an ETF until it could be reinvested properly - something that was viable because at least one broker was allowing very-cheap-or-free ETF trades at the time. We didn't want the board split to drive them away...)

Quite possibly you want more than that, and it's definitely worth exploring whether what you want can be achieved without antagonising too many other users of the board, by suitably changing the definition we use of a HYP. But that change is IMHO not the change to the "any portfolio of investments with high yields" change you've been suggesting - that opens things up to too big a free-for-all. Discussing a portfolio of actively-traded high-yield shares is by no means the only way it is opened up - as another example, how about a portfolio of BTL properties, carefully bought for their high rental yields? Do we really want discussions of how to deal with awkward tenants in practice mixed up with our discussions of how to deal with awkward corporate actions???

As the old saying goes, be careful what you wish for - you might get it! Expressing the wish poorly is a good way to make that happen...

Gengulphus

[Lootman]

But this board is not for all 'those' ways, it's for *this* way.

Well, that is what we are trying to decide, i.e. what this board should be. You can't just announce what it is based on your personal preferences, nor based on what it was at TMF.

As you may have noticed, many related TMF boards have been merged and broadened here. I think we need to take notice of that policy.

Personally I welcome a broader context when discussing HY investing.

[melonfool]

You can't just announce what it is based on your personal preferences, nor based on what it was at TMF.

You have, in several places.

Mel

[Breelander]

Personally I welcome a broader context when discussing HY investing.

So do I, but not so broad it discourages the type of in-depth analysis of a company's accounts that (for me) were one of the benefits I gained from the old board. Trouble was they risked getting 'Closed' for being a bit too OT just when they were getting really interesting

[Stonge]

There is a difference between boards and topics.

I can't see a problem with personalising topics/threads.

What do others think?

[andycowl]

Nice to see we've migrated, scraped, ported the endless meta-meta-HYP TMF discussions to Lemon Fool.

[Lootman]

You can't just announce what it is based on your personal preferences, nor based on what it was at TMF.

You have, in several places.

Mel

No, I haven't. I've expressed my views on how this migration to a new home affords the opportunity to do things better, and have expressed my preferences. I never just announced what this board is, as if that has been decided. Clearly it has not, because here we are debating what it should be.

[Lootman]

Personally I welcome a broader context when discussing HY investing.

So do I, but not so broad it discourages the type of in-depth analysis of a company's accounts that (for me) were one of the benefits I gained from the old board. Trouble was they risked getting 'Closed' for being a bit too OT just when they were getting really interesting

Agreed, and I was not advocating for anything to be omitted that wasn't allowed before.

Although I didn't read the company accounts discussion, mostly because I'm thick about things like that, I absolutely see the value of it. And the value of broader discussions as you note.

I think there is room here for a broad church and for more diversity.

[Breelander]

I absolutely see the value of it. And the value of broader discussions as you note.
I think there is room here for a broad church and for more diversity.

Yes, but in a way the concentration of such distilled wisdom (from others, I hasten to add - not me ) was a side-effect of having such a narrow remit. Too free and we risk loosing that. It brought greater minds than mine to bear on the problems of analysing companies on HYP principles.

I've seen many posts on other boards to the effect that "..you should read the HYP board, they really know their shares - just ignore their strange ways". That's what I fear loosing if we get too loose a 'board style'. It's a fine line to draw - and no, I''m not volunteering for the job!

[Gengulphus]

There is a difference between boards and topics.

I can't see a problem with personalising topics/threads.

What do others think?

Can't answer properly, because I can think of quite a lot of different things you could mean by "personalising" a topic/thread. But most of them suffer either from being purely cosmetic or from failing to work as intended when topic drift happens.

Is what you're thinking of an exception to that? If so, please explain what it is!

Gengulphus

[Lootman]

I absolutely see the value of it. And the value of broader discussions as you note.
I think there is room here for a broad church and for more diversity.

Yes, but in a way the concentration of such distilled wisdom (from others, I hasten to add - not me ) was a side-effect of having such a narrow remit. Too free and we risk loosing that. It brought greater minds than mine to bear on the problems of analysing companies on HYP principles.

I've seen many posts on other boards to the effect that "..you should read the HYP board, they really know their shares - just ignore their strange ways". That's what I fear loosing if we get too loose a 'board style'. It's a fine line to draw - and no, I''m not volunteering for the job!

I see that risk. Part of it comes down to how easy it is for a reader to ignore topics and posts that are not of interest. That's a fairly basic skill on any internet forum, but people do vary in how they can do that. At Uni I had to read huge amounts of narrative and pick out what I thought was relevant and significant, so it comes easily to me. But I accept that a lower signal-to-noise ratio feels difficult to others.

Some of this comes down to the tools that LF provides to enable readers to better sift through the volume and glean the nuggets (which of course are subjective). Also from what I have seen so far, the structure of how this software works, with its greater emphasis on topics and less emphasis on boards, may be helpful here.

Finally, smart people are adaptive, and in the end I feel sure that most here can learn to live with any reasonable comprise or change that is adopted.