The Lemon Fool

Being stuck in bed with some sort of cold/flu (I'm beginning to suspect it's my subconscious finding a way of avoiding Xmas!) I've been further considering my approaches to retirement investing. My predominently HYP shares portfolio has recently hit the traditional £75k and I do intend to expand it further but an inheritance provides the chance to adopting other approaches as well and there is also the choice of how to handle my pension pot if I convert it to a SIPP. I've therefore been looking at Luni's Baskets as one possible option and have been searching the old MF boards for his posts on them. Pity he's no longer here to ask.

Has anyone else adopted either the B7 or B8 approach? What are your opinions on them?

From what I've seen so far the B7 seems to be the most effective one historically but if you were starting out now would you make any changes to its composition.

A good New Year to all

Spiderbill

Personally I would include more international ITs, simply because this is a small island and there are many sectors not really represented.

The other aspect of the baskets I found strange was their sole focus on equity as a source of income. I would include 2 or 3 property, infrastructure, private equity and even p2p investment trusts. I can see Luni's point though, which was that well run income ITs almost always deliver an increasing stream of dividends leaving the punter with nothing to do but spend the money!

I too miss his reviews and updates.

ap8889 wrote:I have a mixed HYP with a few ITs thrown in. The ITs are a lot less volatile but less fun, if that makes sense? Part of the fun of investing is the thrill of taking a calculated risk, and ITs are simply less thrilling, albeit perfectly sensible things to invest in. When I dump a few k in an IT like City of London, it's a bit boring...

I am now planning on adding some ETFs for some cheap passive global exposure. Boring is good sometimes...

In your deliberations on global ITs, have you come across any with a history of decent-ish dividends?

spiderbill wrote:Being stuck in bed with some sort of cold/flu (I'm beginning to suspect it's my subconscious finding a way of avoiding Xmas!) I've been further considering my approaches to retirement investing. My predominently HYP shares portfolio has recently hit the traditional £75k and I do intend to expand it further but an inheritance provides the chance to adopting other approaches as well and there is also the choice of how to handle my pension pot if I convert it to a SIPP. I've therefore been looking at Luni's Baskets as one possible option and have been searching the old MF boards for his posts on them. Pity he's no longer here to ask.

Has anyone else adopted either the B7 or B8 approach? What are your opinions on them?

From what I've seen so far the B7 seems to be the most effective one historically but if you were starting out now would you make any changes to its composition.

A good New Year to all

Spiderbill

Hope you are feeling better this morning.
Like you a started looking at IT's when looking at consolidating my pension pots into a SIPP. Could not decide on whether to go B7 or B8. In the end cherry picked the ones that fitted my goal and went outside the "baskets" as well.

Been 2 years now and the dividends are still coming in, the capital has been a bit hit and miss, but as long as the income keeps coming in not a problem (for now). Personally I would look to fill the gaps in my current HYP portfolio, but you have to decide yourself what you are looking for.

Raptor.

Merry Christmas to you all.

Personally I would include more international ITs, simply because this is a small island and there are many sectors not really represented.

I think that toofast2live is right in his suggestions regarding diversification. I would pick the best top few from the B7, B8 and G10, such as

TIDM  Basket  Name            
MYI	B7    Murray International IT
MRC	B7    Mercantile Inv Trust
PLI	B7    Perpetual Income & Growth
EDIN	B8    Edinburgh
CTY	B8    City of London IT
FGT	G10   Finsbury Growth & Income
SMT	G10   Scottish Mortgage IT

and then add the higher yielding from some different styles and world regions. You might like to check out

TIDM   Name                       F Yield
BRCI   BlackRock Commodities       5.8%
EAT    European Assets Trust       7.7%
HFEL   Henderson Far East Income   5.7%
HSTN   Hansteen Holdings REIT      5.1%
P2P    P2P Global Investments      8.1%
PEY    Princess Private Equity     5.9%
RDI    Redefine International      8.8%
SOI    Schroder Oriental Inc       5.6%

However, most are a little expensive at the moment, so it might be better to drip feed over the coming year, when the Brexit negotiations etc. get under way.

Tramrider

If you want to have a more international portfolio than B7, B8, then also consider Gadge's global It portfolio:

viewtopic.php?p=18033#p18033

Recent review here.

FD

toofast2live wrote:Personally I would include more international ITs, simply because this is a small island and there are many sectors not really represented.

The other aspect of the baskets I found strange was their sole focus on equity as a source of income. I would include 2 or 3 property, infrastructure, private equity and even p2p investment trusts.

Agreed. The problem with these "home brew" approaches like Pyad's HYP and Luniversal's baskets is that they are idiosyncratic and limited to the sphere of knowledge of their sponsors. So Pyad over-emphasises UK HY and value shares because that is the one investment area where he has knowledge. You would not ask him about growth shares, smallcaps or foreign shares.

For Luniversal his knowledge is focused on large UK-focused traditional income and generalist ITs. You wouldn't ask him about ETFs, commodities, bonds or property. In both cases, if you blindly follow these amateur personalised approaches, you are taking on their individual strengths but also their weaknesses and gaps. So for example you would have missed the massive returns from the US market, smallcaps and tech/biotech over the last 20 years.

In the case of Luni's baskets, it always seemed to me that each portfolio consisted of all the ITs in an investment area, minus the ones that Luni thought were flawed in some way. As a result there is a lot of redundancy and overlap within them, which is a faux form of diversification. And possibly a dangerous one because it offers the reassurance of being diversified whilst in fact being significantly under-weight anything that isn't a UK large cap share. UK large caps are about 3% of global market cap and probably not even 1% of the the global investable universe.

Better by far to to diversify properly, and to ensure that each IT adds something unique, going for best of breed in each investment area or sector. As such, both your ideas and some of Gadge's strike me as a better approach. And that is even more true if your aim is growth rather than income, and your concern is single country risk.

spiderbill wrote:Has anyone else adopted either the B7 or B8 approach? What are your opinions on them?

Nope. From what I see from the other replies, as I'm not familiar with the strategy itself, it's not something that would work for me. It seems to ultra-ultra-diverisified, and probably over-lapping itself in many ways. Plus, it seems every channel is fee paying. So in a way it seems the antipode of the original HYP ethos*

[*pls don't think I'm doctrinely wedded to any such ethos, I'm not, and I have evolved my own version that concentrates into fewer/larger holdings, but then I'm fully conscious of the risks that go with it. But even at complete maturity of investment I would seek nothing approaching the apparent vast diversification of what you're suggesting.

[You're fielding opinions, that's mine , I honestly hope that 2c might be one useful perspective point].

Thanks for all your replies guys. Sorry I couldn't respond before now but the flu got worse yesterday and I was pretty out of it. Lots of sleep (at last) and I'm a slightly better today but still not up to decisive thought.

However from what's been said it seems clear that the B7/B8 aren't the safe steady well-diversified alternative that I was hoping for and that I need to do a lot more research before venturing into the IT area.

I'll come back to this when my flu-fugged brain is back to normal but in the meantime many thanks for your ideas.

cheers

Spiderbill

spiderbill wrote: However from what's been said it seems clear that the B7/B8 aren't the safe steady well-diversified alternative that I was hoping for and that I need to do a lot more research before venturing into the IT area.

As a comparison for other approaches you may consider, here is Luni's last ever B7 annual review.
https://web.archive.org/web/20161227172 ... 82736.aspx

You might consider the passive investment universe via various index trackers - see viewforum.php?f=55 Costs tend to be much lower than using ITs, especially if you use the Vanguard ETFs.

Personally I have VWRL, VUK, VERX, and VAPX in my portfolio alongside about 35-hypish shares.

regards, dspp

spiderbill wrote:Thanks for all your replies guys. Sorry I couldn't respond before now but the flu got worse yesterday and I was pretty out of it. Lots of sleep (at last) and I'm a slightly better today but still not up to decisive thought.

However from what's been said it seems clear that the B7/B8 aren't the safe steady well-diversified alternative that I was hoping for and that I need to do a lot more research before venturing into the IT area.

I'll come back to this when my flu-fugged brain is back to normal but in the meantime many thanks for your ideas.

cheers

Spiderbill

Hi Spiderbill

I have always ran ITs alongside my more traditional HYP shares in my overall HY portfolio. Never regretted it at all. The ITs act as a damper to volatility, maintain divis better than individual shares when the proverbial hits the fan, and indeed often switch places with the hyp in terms of returns. Overall it makes a nice balanced HY portfolio.

Having said that, the LUNI baskets I found not diversified enough across the globe and too much overlapped, so have only included a few of his, way before he came on the tmf scene, namely CTY, LWI, MYI, but have added a few such as NCYF, BRCI, EAT,HFEL, SOI, FGT, SMT(outside the HY portfolio these last two)etc...along the way. Only topping up much of these at attractive yield times. The very long term IRR on such a basket is very good indeed and beats many a 'famous' HYP I can think of, as well as quite a few popular trackers. Can't project if that will continue, nobody can.

Be careful when looking at yields quoted above in the thread. For example BRCI and EAT will not yield anywhere near what is quoted in 2017, not that it makes them bad investments imho. BRCI reduced and will pay at least 4p, maybe 5p. EAT paid a lot in 2016 because the previous NAV was up and the GBP/Euro rate helped, but the current NAV is more modest and they pay a fixed percentage of NAV. Just two examples, always read relevant RNS and company reports first before investing.

Good luck

Ozyu

I run some ITs as savings for my grandchildren, and it is always instructive to compare their performance against my own.It's complicated because of different starting dates, and one switch from BIST to FRCL when the management changed.

Start Date   21-Dec-01   27-Jun-03   05-Mar-10   15-Apr-04   07-Apr-11   02-Mar-15        
IRR              Witan        FRCL        FCI         ATST        BSET        FRCL             
IT               8.48%      10.38%       2.97%      10.33%       7.41%      13.44%   TR   
FTSE             2.11%       4.08%       3.41%       3.72%       3.49%       1.57%        
IT on SP         5.92%       8.71%       5.96%       7.20%       0.05%      10.25%        
Period           15.04       13.53        6.83       12.72        5.74        1.84   Years
TJH HYP          9.29%      10.84%      12.03%      10.20%                   9.45%

The top row are Total Return, and the TJH HYP figures are for my accumulation units, so are comparable. The IT on SP figures compare with the FTSE100 index, of course. I don't have a comparable figure for the 4 years of BSET/BIST.

TJH

dspp wrote:You might consider the passive investment universe via various index trackers - see viewforum.php?f=55 Costs tend to be much lower than using ITs, especially if you use the Vanguard ETFs.

Personally I have VWRL, VUK, VERX, and VAPX in my portfolio alongside about 35-hypish shares.

regards, dspp

If the ETF route is of interest, Lars Kroijer's Investing Demystified is worth a read. The approach is somewhat extreme but very thought provoking and good reference point everytime I have a bright idea about something.

I have run the B7 equal weight for the last 18 months.
It has under performed my ETF and general hack accounts for capital. B7 represents about 1/3 of my investments.
Income has been good and MYI is up 20%

I dollar cost averaged funds in, but before I went fully in I snapped up BP and RDSB both over 30% gains from lows.

Here is the results based on investing mid 2015 over a 3 month run. B7 underperformed most of 2016 mainly due to brexit and UK weighting. (hence MYI outperformance)

These are captital gains only over the last 18 months!
Income was 3.x% for most/all with some growth.

Discounts have widened from when I purchased which obviously affects things. Many do hold international stocks too.
I will hold for the long term as I expect Brexit, while short term negative should be long term positive. Plus I want a hands off portfolio. (despite my inability to prevent myself buying what I consider bargains from time to time)

BNKR +10%
FCI +10%
JCH +1%
LWI +1%
MRC +1.8%
MYI +21%
PLI -9%