The Lemon Fool

Is trimming (if you choose to do so) more relevant if you are drawing on the dividends for income, rather than in the building phase? It's just that from how I see things, if in the building phase (as I am), a share runs away in capital value, you would top up other shares using the HYPTUSS and therefore over time bring the HYP back into a general state of capital equality between companies. Is that how the calculations behind HYPTUSS is designed?

Cheers, OLTB.

OLTB wrote:Is trimming (if you choose to do so) more relevant if you are drawing on the dividends for income, rather than in the building phase? It's just that from how I see things, if in the building phase (as I am), a share runs away in capital value, you would top up other shares using the HYPTUSS and therefore over time bring the HYP back into a general state of capital equality between companies. Is that how the calculations behind HYPTUSS is designed?

Cheers, OLTB.

I worked along similar lines as that when in early building phase. Thinking along the lines that buying or topping up other shares did the same as top-slicing/trimming and although now drawing some of the divi's still have a slightly unbalanced portfolio, due to inheriting a portfolio a year ago. Currently using divi's from my ISA to try to re-balance further. Although have 2 shares BT and SVS (Saviles) that I have been toying with disposal/trimming for CGT reasons.

Also have Tesco (TSCO) in ISA that I intend to get rid of next time I have a wad to spend.

Also, in early build stage you can afford to LTBH as we all know the market does change over time.

Raptor.

Thanks Raptor - saved me a job!

Cheers, OLTB

I also run some "winners" that now have a low yield for me. I have Halma (HLMA), Renishaw (RSW), Compass Group (CPG) & Croda (CRDA). All are on low yield but all were high yield when bought. In a few years time I will be taking a lump sum from my SIPP and these shares (all are in the SIPP) will probably be liquidated to fund it.

I think you have to be careful when tinkering/rebalancing. It can be the case that you tinker to balance your portfolio now and in a few years time some event occurs that causes you to wish you hadn't. That's why I'm thinking forward to when I start taking money out of my pension. I also have a possible lump sum from a property sale that may need investing in my HYP in a few years time and that will then skew the balance of the portfolio again and stocks I might trim now to reduce their holding size may not need trimming if I consider the lump sum being added to the portfolio.

fisher wrote:I think you have to be careful when tinkering/rebalancing. It can be the case that you tinker to balance your portfolio now and in a few years time some event occurs that causes you to wish you hadn't. That's why I'm thinking forward to when I start taking money out of my pension.

Good point. I too expect to be in building phase for next 15 years and am currently aiming to grow my overall HYP income by +7.2% pa through natural dividend increases and top ups. This gives me an annual target to measure against and enables me to guesstimate the present value of my future retirement income. Provided my overall HYP income is meeting its annual target (which it has done for last 8 years), I don’t plan to tinker with any holdings unless a corporate action (takeover, rights issue etc.) or dividend failure forces or invites me to. I expect to continue this approach during drawdown phase although I will likely adjust the annual target to the inflation rate of the day.

OLTB wrote:Is trimming (if you choose to do so) more relevant if you are drawing on the dividends for income, rather than in the building phase? It's just that from how I see things, if in the building phase (as I am), a share runs away in capital value, you would top up other shares using the HYPTUSS and therefore over time bring the HYP back into a general state of capital equality between companies. Is that how the calculations behind HYPTUSS is designed?

Cheers, OLTB.

Absolutely right! What one does when building and what one does when in draw-down mode are/should be quite different.

77ss wrote:

OLTB wrote:Is trimming (if you choose to do so) more relevant if you are drawing on the dividends for income, rather than in the building phase? It's just that from how I see things, if in the building phase (as I am), a share runs away in capital value, you would top up other shares using the HYPTUSS and therefore over time bring the HYP back into a general state of capital equality between companies. Is that how the calculations behind HYPTUSS is designed?

Cheers, OLTB.

Absolutely right! What one does when building and what one does when in draw-down mode are/should be quite different.

In general I agree. However, if a share does run away with you so that it becomes a very high percentage of the portfolio value, then trimming back can make sense. It happened to me back in 1997 with LLOY and AZN (Then just Zeneca), when LLOY got to 16% and I had stopped subscribing to my PEP for a while. It was a time when demerging was rife and I had about 15 or 16 shares. Selective topping up would not have worked for me. I decided to set a limit of 10% maximum weight at that time.

TJH

And looking at the current Lloyds share price (58.25), I'm pretty sure you're relieved you made that decision - share price info from Yahoo Finance states that LLoyds share price on 5th Dec 1997 was 506.06!

Cheers, OLTB.

And looking at the current Lloyds share price (58.25), I'm pretty sure you're relieved you made that decision - share price info from Yahoo Finance states that LLoyds share price on 5th Dec 1997 was 506.06!

A lot of water has gone under the bridge since then. My average cost is now about 65p.

TJH

OLTB wrote:And looking at the current Lloyds share price (58.25), I'm pretty sure you're relieved you made that decision - share price info from Yahoo Finance states that LLoyds share price on 5th Dec 1997 was 506.06!

Yes - though inbetween those 1997 shares have first had a 1-for-40 bonus issue, after which each share was only worth 40/41sts of a 1997 share. Then they had a compensatory open offer entitlement and later a right stripped off them, both of which had a monetary value, which further reduced the fraction of a 1997 share that a current share is equivalent to. The total effect is that each current share is the equivalent of only about 56.5% of a 1997 share, given the CHYP1 raised its holding from 702 shares to 1242 shares in the course of those events without either adding or removing capital (source: table at the end of https://web.archive.org/web/20121215051601/http://boards.fool.co.uk/updates-and-corrections-to-hyp1-history-11788808.aspx).

So your comparison should be of 58.25p with about 56.5% of 506.06p = about 286p. Still bad, of course, but about 20.3% of the original value rather than about 11.5% of it.

Gengulphus

Gengulphus wrote:
So your comparison should be of 58.25p with about 56.5% of 506.06p = about 286p. Still bad, of course, but about 20.3% of the original value rather than about 11.5% of it.

Quite right - I hadn't looked at the entire history of the share price and now realise there were a number of actions that I hadn't taken into account. It was more a comment on how tjh's decision to 'trim' perhaps paid off given the recent colourful ride that Lloyds has endured.

Personally my plan will not be to trim but not too sure how my resolve will be given potential run aways in value! I must channel Doris and perhaps prise out the 'sell' button on my Mac.

Cheers, OLTB.

OLTB wrote:Is trimming (if you choose to do so) more relevant if you are drawing on the dividends for income, rather than in the building phase?

Definitely!

I am fully built and in draw down mode with no new money going in, so I pay more attention to balance than I did while building.

I'm an almost no tinkering holder and add new money as a builder but I have thought that if a share really romps away, say quadruples in value, such that the yield is well below market average one could bank many years of potential income and reinvest it at above portfolio average. A builder who was looking to build an income stream faster would be well suited to trim. I'm not sure that it is necessarily less relevant to builders than drawers as it's an income maximising strategy, that works whatever your stage, whether rolling up income in the portfolio or taking it out, the increase is a great benefit - provided trading costs are only a small portion of the increase in income.