Are you a slow tinkerer or not?

[idpickering]

Good morning,

On reading through the "I see VOD is now below 200p" thread I noted a comment by well respected HYPer Arb, posted November 25th, 2016, 10:17 am;

Ard said/typed "So, I would say I am a slow tinkerer" and got me thinking. In recent months all I have done is just leave my HYP alone, and continue with my monthly top ups, which I post here, and the previous place, openly and honestly. In fact my last sell was on 9 Feb 16 when I sold Rio Tinto to bring in Taylor Wimpey. I do recall at the time that I should be more hands - off, and am quite proud that I have done just that.

So, the question is, are you a 'slow tinkerer", or are you prone to fiddle more often? Or are you in fact a model HYPer and don't meddle at all?

Regards,

Ian.

[Itsallaguess]

So, the question is, are you a 'slow tinkerer", or are you prone to fiddle more often? Or are you in fact a model HYPer and don't meddle at all?

Regards,

Ian.

I've just checked my HYP sales-history for the past three years and have the following notes -

1. Sold the Verizon shares for no commission when I received them as part of my Vodafone ownership. Had no desire to own shares in that company as part of my HYP and saw them as a complication that I didn't ask for or want to keep.

2. Sold Rexham into the market when they were at the back-end of their takeover process. The market was offering the take-over price a little sooner than the take-over date, so I took the opportunity to divest into another HYP holding that looked favourable at that time, which also then allowed me to completely forget the Rexham process itself from that point.

3. Reduced my holding in a HYP share that had got well ahead of itself in recent years. It's yield had dropped to just less than 3%, which was something I do try to keep an eye on, but more importantly it was in danger of becoming too large a part of my HYP in terms of capital and dividend income received. Rotated the sale proceeds into an income IT and a stand-alone HYP share in a new sector for my HYP. I instantly felt better about the whole process, and I look on my HYP spreadsheet with less dread now with regards to the smaller influence the original share still has on my HYP. It's also good to see an 'instant' boost in my forecast-dividend income having carried out this process. Rotating out of a 3%-ish yield and into two areas that are yielding around 4-4.5% has certainly made the whole process well worth carrying out for all of the above reasons.

Looking at the above three sales for the past three years then, I'd certainly not call myself a 'tinkerer'. I do think that LTBH is the best overall method for overall returns based against effort and emotional-cost.

Having said this, however, I do think there's also another, probably more important area where I'd call myself a 'tinkerer' though, which I should add to this post, which is where I'm not 'religious' about continuing to drip dividend-proceeds or accrued-capital into my HYP. I'm still working and fund my HYP with cash most months whether I buy shares with those funds or not, and I'm quite happy to let funds build up if I think I'd feel better about doing that than simply continuing to drip-feed.

This helps me a great deal in terms of being quite happy to 'never be a seller' in my HYP holdings, and doing the above enables me to forget about the HYP itself, in terms of the shareholdings in it, completely, with most of my thinking-time taken up with the cash-element of my HYP. I won't pretend that this situation is due to any sort of design, or deeply thought-out process, and it really is a situation that I've stumbled into over the years, but it absolutely suits my investment-personality, and enables me to sleep well at night whilst continuing to 'never be a seller' with my HYP shares.

I'm around 14% cash right now, after keeping a little back from my holding reduction above in point 3, but I've decided that level is enough now, and any further accrued dividends or capital will now be drip-fed into top-ups of existing holdings with a view to increasing my HYP income. I'm not sure when the 14% cash would get used, but I like it just 'being there' for now, and if carrying out such a process is the price I need to pay to help me manage the HYP holding themselves in a way that I want to, in terms of my LTBH strategy, then so be it. I do feel very lucky to have found a process and strategy that I've been able to plod along with for many years now, and am able to maintain my hands-off approach to the HYP portfolio itself.

So having looked at all of the above, I think I would call my cash-management side of things a tinkering-strategy of sorts then, so I won't pretend that tinkering is just about the shares-side of things. That said, I think the way I hand the cash side of things is steady enough for me to claim 'slow tinkering' status if I can please....

Cheers,

Itsallaguess

[idpickering]

So having looked at all of the above, I think I would call my cash-management side of things a tinkering-strategy of sorts then, so I won't pretend that tinkering is just about the shares-side of things. That said, I think the way I hand the cash side of things is steady enough for me to claim 'slow tinkering' status if I can please....

Cheers,

Itsallaguess

What an outstanding post Itsallaguess, thank you. You raise an interesting point regarding holding cash. I tend to hold only what's left over after each sale, in the available cash element of my Halifax ISA. That small amount is added to the next monthly dollop and invested wherever. My thinking is that the return I'm earning in cash is so poor I'd rather get the money working for me in the HYP. Having said all that, there is the added benefit for your method, that you have some powder dry to take advantage of opportunities as they arise.

In short, you are indeed a slow tinkerer.

Regards,

Ian.

[pendas]

I tend to hold for the long term because I avoid making difficult decisions.

BT has been held since privatisation and Aviva and Lloyds have been held since parts of their makeup demutualised and I still hold RBS and also A&L as was in the form of Banco Santander shares.

As I transfer shares across to ISAs each year, I take the opportunity to make some adjustments, but generally purchase the same shares again. I did sell a small top up stake in HSBC this year which I had mistakenly purchased in the wrong account!

One deviation from strict HYP over the last 18 months has been to purchase shares in Murray International, MYI, pre the referendum rather than individual shares.

[88V8]

I used to be a Fast Tinkerer. Any dividend cuts or passes, and out they went.
But that can get expensive.
If one is underwater, each sale sacrifices some capital.

So now, as a rule I take on board TJH's point about share price recovery, grit my teeth and hang on.

Example, Antofagasta. A formerly reliable churner-out of 'specials' but no more. If I had ditched them straight away, I would have been 50% down. Now, they are within 10% of being lobbed overboard.

Tesco, I sold immediately. I put the money into Sky. Paying divis, so better than Tesco, although the capital is now down grrr.
I also ditched BHP, and going back, Aviva, RSA, Halfords, First Group, and more.

By conviction, I am a fast tinkerer. But nowadays, I mark their card, bide my time, wait.

V8

[idpickering]

What an outstanding post Itsallaguess, thank you. You raise an interesting point regarding holding cash. I tend to hold only what's left over after each sale

Sorry guys, in my reply to Itsallaguess I wrote the above. I of course meant "purchase" not "sale".

Ian.

[MDS1951]

I don't really know! Here's my record for the last 3 years.

Sale WMH 4.2.2013 - all the holding, for ethical reasons; I can't remember what I bought with the proceeds.
Sale MKS 12.11.13 - all the holding, only a small holding.
Trim TUI 18.01.13 - only about 25% of it, was getting too close to double my median holding.
Sale CWC 05.03.14 - disastrous purchase - a failed tinker out of BT.
Sale BBY 25.03.15 - lost patience with them.
Trim PSN 21.05.15 - PSN looking very toppy.
Sale TSCO Dec 2015 - fed up with TSCO, couldn't see when they might next pay a dividend.
Trim PSN 18.02.16 - PSN looking very toppy still.

All the proceeds were invested elsewhere in my HYP and it is too soon to say overall whether the tinkering was worth the trouble.

MDS1951

[fisher]

I've been running a HYP or my variant on it since about 2000. I have tinkered quite a bit - particularly when I thought I could be clever by selling a stock whose yield had dropped and buying a "bargain" on a high yield. A lot of the time the stock with the low yield went on to increase dividends above inflation while the "bargain" cut its dividend. Not all the time, but quite a few times. So I have stopped voluntarily selling now. I think PYAD was right about most people making the wrong decisions when they decide to sell and buy something else.

If you have a strict set of tinkering rules, selling when a stock, or part of it exceeds your limit and buying something else then I think it may be worth it, but if you don't have such a set of strict rules I think you are probably just as well off not selling anything. This is why I have around 35 stocks in my HYP - all were HYP pick once upon a time, but a lot would not be considered HYP picks now and I do not sell these, nor do I top them up.

It you do have a strict set of tinkering rules then I don't think you can be a slow tinkerer can you? And if you do not have a strict set of rules then you shouldn't tinker IMHO.

[CryptoPlankton]

Looking back at my activity over the past few years, it's clear I have been a progressively slowing tinkerer - to the point now where I would definitely call myself a (painfully!) slow tinkerer.

I've never had a great deal of discipline in the building of my "HYP". This is partly because it has been built from a combination of new cash and the transformation of an existing non-HYP portfolio. The original portfolio lacked any real strategy and already had some HYP-type shares (most of which have survived to this day) and some out and out growth shares - which have been sold at opportune times sp-wise over the years. It also had a few "middle-ground" shares which I have had to make decisions on as time has passed.

It would seem that the portfolio has finally matured and I have only made three sales over the past 18 months: Premier Farnell and Amlin (because of the impending takeovers) and Reckitt Benckiser - because its capital growth allowed me to purchase far greater income elsewhere. Now, finally, I look at all my holdings and feel satisfied that the portfolio is fit for purpose. As far as tinkering cutters is concerned, well I have tended to go with my gut feel: RBS and First Group were out like a shot - Lloyds and Tesco have been kept. Lloyds is still down in capital terms, but paying divis again and I'm comfortable with the future prospects (I'm looking forward to the day I decide to trim it back!). Tesco is such a tiny fraction of the portfolio that selling it would do little to boost income and so it may as well sit there waiting for the inevitable recovery (I believe it still has a few assets...).

Anyway, I see very little activity from now on other than corporate actions and maybe the occasional trimming of an exceptional performer or axing of a cutter if I really feel the need. But, now I have the kind of balance I set out to get all those years ago, I can't see me touching it much at all. Maybe I'll post the holdings sometime, but it isn't really a classic HYP, having a few IT's thrown into the mix. Also, it is split between two providers and there are still the odd non-HYP holdings (IT's, ETF's) in each account which means I'd have to do a few sums to show it broken down correctly by weights. I suppose I could, but I'm a lazy so-and-so and, at the end of the day, I'm only really interested in one figure - how much income it pays...

CP

[Raptor]

Ian,

Am currently sitting on my balcony in Tenerife so do not have all my records, but would say I am a slow "pickerer". I think I would have got rid of BT and SThr but for my inheriting a larrge portfolio that has made me work hard to balance what I have. I did sell 2 shares to grab a profit pre-Brexit, STOB was one but the name of the other escapes me, both divi policies were low and maybe should never have been Brought in the first place . I have also decided that when I get back I will sell TSCO so as to have enough in my ISA to buy a chunk of a High yield share, not sure which one yet, was Marks, MKS, before holiday. I am lucky not to have actioned BT and Sthr as they seem to have swung back but still need to keep an eye on them due to CGT.

I would love to be able not to sell or top slice but to be honest need to keep the divi income rising and do not always have the SI to wait out the turnaround.

Raptor.

[idpickering]

Thanks for sharing your thoughts on this guys. Unfortunately the item written by Stephen Bland called "Tinkering" seems to be unavailable, but another one entitled "To dabble or not" may well be a good substitute;

"One rule I set myself for the high yield portfolios (HYP) I portray here is that there is never any voluntary trading of the shares, so the only changes that occur are those mandated by some action from the companies such as takeovers or reorganisations. There are two principal reasons why I set the no-dabble rule.

Firstly, it is simply the route of least work. I intended the HYP idea originally for income investors, probably retired, who once invested need hardly worry themselves ever again with capital matters, leaving them free to enjoy the income and pursue their personal ananda.

Secondly, I believe a large proportion of investors do not possess the skills to make successful changes to a long-term portfolio anyway, essentially because they may be far too easily influenced by short-term events, press comments and so on, that in practice matter little in the long run.

As a result, poor calls on changes are made that with hindsight demonstrate shortsight. This view is not scientific, but based on personal anecdotal evidence of having observed many small investors over the years during which the buy and holders outperformed most dabblers. I conclude that for long-term HYP investors, sheer indolence is a fine strategy.

My theoretically ideal HYPer was a person disinterested in the market yet willing to take the risks with income and capital that characterise an equity portfolio compared with fixed interest alternatives like gilts. The demo portfolios I run are there to prove that my ideas have merit (or not), though it will take quite a time for this to be shown since they are intended for the very long term. They are just my ideas and I am not suggesting this is the only way to go for HYPs. Clearly everyone who runs an HYP will do it their own way in any event but since I write about the strategy, I write about my preferred way while realising naturally that it will not suit everyone. You can't please 'em all, so I tend to aim my version of the strategy at my theoretical HYPer, that granny in Hove whose daughter has set up a permanent portfolio."

http://news.fool.co.uk//valueinvesting/ ... 031212.htm

[Breelander]

...Unfortunately the item written by Stephen Bland called "Tinkering" seems to be unavailable...

This one?

Don't Tinker! By Stephen Bland | 23 May 2007
...I'm not sure when HYPers jargonised this word but as far as memory serves, which ain't too far at my age I can tell you, it is not one of the words in the HYP vocabulary that I coined. Good job too because according to the OED, the verb to tinker means:

To attempt to repair or improve something in a casual or desultory way, often to no useful effect.

http://web.archive.org/web/200710141259 ... inker.aspx

If not, let me know the date and any other details and I'll look for it...

[Instep]

Unfortunately the item written by Stephen Bland called "Tinkering" seems to be unavailable, but another one entitled "To dabble or not" may well be a good substitute;

Hi Ian
You might have been looking for this one.Tinker Tailor Stephen Bland on the subject of tinkering.
http://news.fool.co.uk/news/investing/2012/09/27/tinker-tailor.aspx?source=isesitlnk0000001&mrr=1.00
Written in 2012, It was followed up by lots of comments that have been repeated here since this board opened. It's time we got the FAQ sorted out and just got on with the practical aspects of running our HYPs.
Anyway, to answer your question, I am a slow tinkerer.
Instep

[Instep]

... I'll look for it...

Great minds think alike, but no two answers are a ever the same.

[kempiejon]

Since 2014, in my ISA sheltered part of the HYP I have only sold S32 and Verizon both unwanted spin offs from other holdings, in the unsheltered account I have sold DS Smith, Vodafone, British American Tobacco, Provident Financial Group, Jardine Lloyd Thompson and United Utilities, the sales were to use my capital gains annual allowance limit using the cash to fill new ISAs. I also sold the Verizon part of the VOD demerger, I have let Premier Farnell and Rexam takeovers run their course for cash takeovers.

Prior to 2014 I was not harvesting capital gains and there are no unforced sales except for Antofagasta and Foreign and Colonial Asset Management. I bought ANTO in May 2012, they cut their dividends and I sold a few months later in September for about what they cost me ditto FCAM bought 2006 sold 2007. Ah turns out I had ANTO in the ISA too and did the same. I sold international Personal Finance when it came out of Provident Financial. There's been a few other takeovers and corporate actions, Tomkins, Scottish and Newcastle, cable and wireless, Amlin.

I'd say I'm a non tinkerer. I do scratch that itch with some non HYP operations, HYP is the majority of my investment.

[jimleigh]

I like to believe i'm a slow tinkerer and still hanging on to the following poor dividend payers, bears that out: Tesco, Balfour Beatty and BHP Billiton.
On the other hand just in 2016 I have tinkered the following:
Top sliced: Electrocomponents x 3, National Grid x 2, BAE Systems, Tate & Lyle, British American Tobacco, SSE.
Lapsed Rights: Cobham.
Sold: Rexam (before takeover by Ball).
Taken over: Amlin.
So that's 12 tinkers in a 33 share portfolio.

[Deev8]

I am definitely a slow tinkerer, occasionally very slow indeed.

That "relaxed" approach extends to most aspects of managing my HYP. An example being when South32 was spun-off from BHP Billiton in May 2015 I decided, as a number of HYPers did, that I didn't particularly want to keep the S32 shares in my portfolio ... but I haven't actually got around to selling them yet. In that case the relaxed approach has worked in my favour - the South32 shares are worth some 40% more than they were immediately after the demerger, but of course being slow can work against me just as often.

Dave

[miner1000]

As most will know, I dont tinker at all. Well, I did sell BP after the Macondo affair, but I got out at 520p and I dont know if they ever got back there, and I bought RDSB immediately with the proceeds.

This of course means that I have all the dogs still in my HYP (Tesco, BBY, AMFW) and I also have some shares that have grown to form a larger part of my HYP than some would consider wise (AZN, BAE, LLOY). However, I can live with the lack of balance. I am sure others will do better than me, but my HYP is still up overall and pays me a 4.5% overall divi yield so I am OK with it.

Miner

[spiderbill]

I haven't tinkered much, and probably won't tinker anything large, but in principle I don't object to it if there is a solid reason for doing so.
My sales have been few and mostly either getting rid of small holdings in dogs (BBY and Tesco), or swapping into ISA protection (Charles Taylor, VOD).

Having learned a great deal in the last 5 years of what works and what doesn't and what suits me and what doesn't, I do have some other small holding failures (Spirent, Molins, Majestic, ITE and maybe even Centrica) which I do intend to get rid of as I concentrate on more conventional HYP shares, but that's really just tidying up as none of them is more than 0.5% of the portfolio.

[johnstevens77]

I am in the draw down stage and a slow tinkerer. Mostly transfering shares to ISA's. I will be selling some LLoyds this tax year to crystalise a capital loss to offset gains when a takeover put me over the limit this year but the proceeds will go towards LLoyds shares held in an ISA next year.

john