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moorfield HYP update 2016

General discussions about equity high-yield income strategies
Gengulphus
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Re: moorfield HYP update 2016

#24095

Postby Gengulphus » January 18th, 2017, 11:33 am

Wizard wrote:OK Gengulphus, I could create an example with a bad late year on but where previous better than target years mean the shortfall is actually much smaller. But we are just creating hypothetical examples to support our own views. Instead I will try to get back to the original point I was trying to make.

No, I'm not creating a hypothetical example to support my own view - I've seen the bad late year happen in reality. I retired in the spring of 2010 - and my HYP income for the tax year 2009/2010 was about a third down on my HYP income for the previous tax year. That wasn't a problem for me - but it could well have been if in previous years I'd complacently reckoned that because I was getting good income growth in earlier years that was keeping me up with a naively-designed schedule, I didn't need to make extra contributions.

And in any case, good planning requires one to create a range of realistic hypothetical examples, to make certain one can cope with various plausible risks. I'm not saying that HYPers are bound to hit a bad late year - just that there is a risk that they'll do so, and thus planning on the basis that they won't is dangerous.

Wizard wrote:My point was simple. If you are building an HYP over several years with a target level of growth of the income it produces if in one year the growth falls short of your target it can't be a bad thing to try and reach your target by finding some extra new funds to inject to help make up the shortfall or at least reduce the shortfall - my very first comment did say funds permitting.

You have latched on to the fact that in some cases funds may not be permitting. But I still do not understand why you think trying to add extra new funds when the HYP growth falls short of target is a bad thing. What is the alternative just accepting the shortfall? Why is that better?

The alternative is what I originally suggested in http://www.lemonfool.co.uk/posting.php?mode=quote&f=31&p=23184#pr23020, which for some reason you decided to regard as over-complicating things: "... the schedule should be designed on the basis of realistically being able to cope with bad years, not of neatly getting to the target income if all years are average". That means designing the schedule not for smooth growth up to the final target, but for being reasonably well ahead of that smooth growth, so that you can cope with the risk of hitting a late bad year.

Where you got the idea that I "think trying to add extra new funds when the HYP growth falls short of target is a bad thing", I don't know. What I actually think is that if you set your targets on a smooth growth basis, you should also add extra funds when the HYP growth is up to target or even a fair amount ahead of it - it's only if you're well ahead of targets set on that basis that you can reasonably safely take a contribution holiday. Or an alternative way of looking at it is that you should set your targets on a suitable well-ahead-of-smooth-growth basis - with the right target schedule, you could indeed merely add extra funds when you were short of target.

Gengulphus

moorfield
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Re: moorfield HYP update 2016

#44065

Postby moorfield » April 6th, 2017, 1:51 pm

Hello All

I've moved this over to the Portfolio Management & Review board alongside others, plus an update now that I have (provisionally) completed my building work for the year.

viewtopic.php?f=56&t=4391#p44061

M


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