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HYP1 is 21

For discussion of the practicalities of setting up and operating income-portfolios which follow the HYP Group Guidelines. READ Guidelines before posting
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Gengulphus
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Re: HYP1 is 21

#459659

Postby Gengulphus » November 20th, 2021, 5:43 pm

1nvest wrote:In HYP1 case consider PSN with all of dividends reinvested has grown 27x since November 2000. £5K original investment with dividends reinvested = £135K present day nominal value. Since 2000 RPI has seen a 1.8x increase, £75K rising to £135K. So PSN has been the MCD in the HYP1 case. Dump PSN, get all of your original inflation adjusted capital back and with a divisor of zero the remainder provide a infinite dividend yield :) Maybe reinvest the PSN proceeds into another HYP2 set to start all over again with the added benefit of a 'free' HYP1 running alongside that.

Can we get back to something like reality, please?

I agree that at least as a matter of academic curiosity, it might be interesting to work out how HYP1 would have fared if its owner hadn't taken any dividend income from it, but had instead automatically reinvested all of the dividends it has produced in the shares that produced them.

But it would not have included a holding of Persimmon with all dividends reinvested since November 2000 - because HYP1's holding of Persimmon has only existed at all since 2008 (along with a holding of Pearson), as a result of reinvesting the takeover proceeds of Britannic/Resolution and Scottish & Newcastle!

Gengulphus

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Re: HYP1 is 21

#459715

Postby MDW1954 » November 20th, 2021, 9:09 pm

Moderator Message:
No further off-topic discussion, please, or this thread will be locked and/or posts deleted. For the avoidance of doubt, this explicitly means discussing anything not directly HYP1-related. -- MDW1954

tjh290633
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Re: HYP1 is 21

#459738

Postby tjh290633 » November 21st, 2021, 12:27 am

MrFoolish wrote:Some will have a preferred that diversity is maintained with a TJH type approach. Indeed, this is rarely, if ever, criticised. TJH's strategy is a complete one, unlike pyad's where its limitations get swept under the carpet. I will take my hat off to TJH for not ducking the difficulties.

My decision to limit the value of any one holding arose in 1997, when Lloyds TSB rose by 83% to about 16% of my portfolio, and the then Zeneca was also heading in that direction with a rise of about 30%. I decided that 10% in any one of my then 18-share portfolio was an appropriate limit and trimmed them back to below that level.

As the number of shares in the portfolio increased, I modified that limit, first to twice the median holding value and then to 1.5 times that value. As the old sayings goes, it is never wrong to take a profit.

TJH

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Re: HYP1 is 21

#459863

Postby Bubblesofearth » November 21st, 2021, 3:59 pm

tjh290633 wrote:My decision to limit the value of any one holding arose in 1997, when Lloyds TSB rose by 83% to about 16% of my portfolio, and the then Zeneca was also heading in that direction with a rise of about 30%. I decided that 10% in any one of my then 18-share portfolio was an appropriate limit and trimmed them back to below that level.

As the number of shares in the portfolio increased, I modified that limit, first to twice the median holding value and then to 1.5 times that value. As the old sayings goes, it is never wrong to take a profit.

TJH


The other side of that argument is to let your winners run;

https://www.macrotrends.net/stocks/char ... ce-history

BoE

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Re: HYP1 is 21

#459899

Postby csearle » November 21st, 2021, 7:28 pm

Bubblesofearth wrote:The other side of that argument is to let your winners run;
The other side of that argument is that by letting your winners run you put yourself in an increasingly less diversified situation, which may be important to you.

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Re: HYP1 is 21

#460333

Postby Bubblesofearth » November 23rd, 2021, 3:46 pm

csearle wrote:The other side of that argument is that by letting your winners run you put yourself in an increasingly less diversified situation, which may be important to you.


I do see this quite a lot hereabouts but have yet to see a real time portfolio (of at least 15 shares) actually suffer because of a decrease in diversification. Unless a decrease in diversification is, itself, taken as the definition of suffering.

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Re: HYP1 is 21

#460339

Postby dealtn » November 23rd, 2021, 3:54 pm

Bubblesofearth wrote:
csearle wrote:The other side of that argument is that by letting your winners run you put yourself in an increasingly less diversified situation, which may be important to you.


I do see this quite a lot hereabouts but have yet to see a real time portfolio (of at least 15 shares) actually suffer because of a decrease in diversification. Unless a decrease in diversification is, itself, taken as the definition of suffering.


Well the Banking Sector collapse seriously affected me, quite probably more than others, but I doubt I was alone - although that was enforced lack of diversification, not through choice. Trust me that was "visible"!

I am sure there won't be an absence of posts in the future if any of BATS, IHG, PSN or RIO run into trouble. It will be interesting to see the balance of "told you so" to "it isn't the end of HYP" type responses should that happen.

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Re: HYP1 is 21

#460402

Postby csearle » November 23rd, 2021, 9:15 pm

Bubblesofearth wrote:
csearle wrote:The other side of that argument is that by letting your winners run you put yourself in an increasingly less diversified situation, which may be important to you.


I do see this quite a lot hereabouts but have yet to see a real time portfolio (of at least 15 shares) actually suffer because of a decrease in diversification. Unless a decrease in diversification is, itself, taken as the definition of suffering.
Well I'd like to help you but can't because by top-slicing my winners I've never put myself in a position to suffer. C.

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Re: HYP1 is 21

#460423

Postby tjh290633 » November 23rd, 2021, 10:41 pm

Bubblesofearth wrote:
csearle wrote:The other side of that argument is that by letting your winners run you put yourself in an increasingly less diversified situation, which may be important to you.


I do see this quite a lot hereabouts but have yet to see a real time portfolio (of at least 15 shares) actually suffer because of a decrease in diversification. Unless a decrease in diversification is, itself, taken as the definition of suffering.

Maybe you should look at the history of IUKD from the beginning. It was very heavily into financials and never really recovered from the setback of the 2008 recession. The modus operandi was changed soon after to avoid such concentration.

TJH

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Re: HYP1 is 21

#460455

Postby Bubblesofearth » November 24th, 2021, 5:46 am

tjh290633 wrote:Maybe you should look at the history of IUKD from the beginning. It was very heavily into financials and never really recovered from the setback of the 2008 recession. The modus operandi was changed soon after to avoid such concentration.

TJH


Concentration on inception is different from concentration by evolution.

BoE

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Re: HYP1 is 21

#460514

Postby 88V8 » November 24th, 2021, 10:52 am

Bubblesofearth wrote:
tjh290633 wrote:Maybe you should look at the history of IUKD from the beginning. It was very heavily into financials and never really recovered from the setback of the 2008 recession. The modus operandi was changed soon after to avoid such concentration.

Concentration on inception is different from concentration by evolution.

Begin by being risky or end up being risky, different journey, same destination.... eggs... basket.

I hate cutting my winners, but as recently seen with RIO and Admiral, what goes up may go down. If I'd trimmed those winners and reinvested, I might have been better off now... depending where I'd reinvested of course.

And in terms of divi, which is what matters hereabouts, Admiral may maintain its divi, but Rio very unlikely to so that will be a double fail.

But HYP1, a great high-wire act, we look forward to the next anniversary of the experiment.


V8

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Re: HYP1 is 21

#460609

Postby Bubblesofearth » November 24th, 2021, 4:45 pm

88V8 wrote:Begin by being risky or end up being risky, different journey, same destination.... eggs... basket.

V8


The risk to your initial capital is very different.

BoE

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Re: HYP1 is 21

#460615

Postby 88V8 » November 24th, 2021, 5:04 pm

Bubblesofearth wrote:
88V8 wrote:Begin by being risky or end up being risky, different journey, same destination.... eggs... basket.


The risk to your initial capital is very different.

I think fifteen diversified shares is not an unreasonable starting point.

V8

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Re: HYP1 is 21

#460784

Postby vrdiver » November 25th, 2021, 10:39 am

Bubblesofearth wrote:Concentration on inception is different from concentration by evolution.

I'm not sure about that.

Let's imagine an investor who puts £5k into 15 different shares, £75k in total, nicely diversified.

Time rolls on and the portfolio has morphed into 8 shares, but worth £100k (maybe a bit extreme, but stay with me).

Our investor talks to a friend who has £100k to invest and is looking for advice. They buy 20 different shares, putting £5k into each.

Snapshot in time: two investors, one diversified, the other not so much.

Both investors are the same age, and have the same financial needs and goals.

Should the second investor have replicated the first's portfolio (after all, it is stuffed full of winners, now...)

Should the first investor have taken their own advice on diversification and done some rebalancing?

Is their any relevance to the fact that one investor has been in the market longer than the other (consider that the other investor was, presumably, doing something with the money that eventually found its way into a HYP).

VRD

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Re: HYP1 is 21

#460806

Postby Arborbridge » November 25th, 2021, 12:11 pm

Bubblesofearth wrote:
tjh290633 wrote:Maybe you should look at the history of IUKD from the beginning. It was very heavily into financials and never really recovered from the setback of the 2008 recession. The modus operandi was changed soon after to avoid such concentration.

TJH


Concentration on inception is different from concentration by evolution.

BoE


I'm not how that would be? What mechanism are you thinking of? Concentration is concentration unless, perhaps you are thinking that an initial concentration would be chosen with great care and study, whereas the evolution type is just up to the vagaries of the market.

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Re: HYP1 is 21

#460851

Postby Bubblesofearth » November 25th, 2021, 2:12 pm

vrdiver wrote:I'm not sure about that.

Let's imagine an investor who puts £5k into 15 different shares, £75k in total, nicely diversified.

Time rolls on and the portfolio has morphed into 8 shares, but worth £100k (maybe a bit extreme, but stay with me).

Our investor talks to a friend who has £100k to invest and is looking for advice. They buy 20 different shares, putting £5k into each.

Snapshot in time: two investors, one diversified, the other not so much.

Both investors are the same age, and have the same financial needs and goals.

Should the second investor have replicated the first's portfolio (after all, it is stuffed full of winners, now...)

Should the first investor have taken their own advice on diversification and done some rebalancing?

Is their any relevance to the fact that one investor has been in the market longer than the other (consider that the other investor was, presumably, doing something with the money that eventually found its way into a HYP).

VRD


When I make an investment I am concerned with the risk and potential reward to the capital that I am investing. I accept that the market will have its way with the individual components and that the appearance of the portfolio over time will likely change. I understand that market evolution is such that gains are usually driven by a relatively small handful of companies that go on to be very successful. It does not, therefore, make sense to me to rebalance out of companies whose share price is responding to company growth. If I keep doing this then, eventually, I am going to end up with more and more weighting in duds. Plus I will be incurring charges along the way.

Clearly this is a matter of degrees. If rebalancing is done only infrequently and substantial stakes in the original companies held, then the deviation from no rebalancing will be smaller than if entire holdings are replaced. But my challenge to anyone engaged in rebalancing would be to keep a log of how their portfolio would have performed (remembering to include charges) if no rebalancing had been done. I'm not aware that TJH or anyone else on here who advocates rebalancing has done that?

I can see that there appears to be a logical inconsistency between advising equal weighting on inception and not rebalancing back to equal weighting over time. This is IMO resolved by considering the mechanics of what you are actually doing when rebalancing out of growing shares and with reference to the way markets (and hence portfolios) evolve.

So, in answer to your question, my advice to the person with £100 to invest would be to equal weight a portfolio of shares and then leave it alone unless forced by take-overs etc.

BoE

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Re: HYP1 is 21

#461163

Postby tjh290633 » November 26th, 2021, 1:43 pm

Bubblesofearth wrote:
Clearly this is a matter of degrees. If rebalancing is done only infrequently and substantial stakes in the original companies held, then the deviation from no rebalancing will be smaller than if entire holdings are replaced. But my challenge to anyone engaged in rebalancing would be to keep a log of how their portfolio would have performed (remembering to include charges) if no rebalancing had been done. I'm not aware that TJH or anyone else on here who advocates rebalancing has done that.
BoE

For every individual share that I have held, I have a calculation of how that share would have done, had I bought once at the initial price and held without change until now, or until sold. This assumes that all dividends, ordinary or special, are taken as cash and that all rights are sold.

Sometimes the outcome is better than my actual holding, sometimes it is worse. Note that I do not rebalance as such, just reinvest dividends in what I consider to be the best share at the time. I also too slice if a share goes past my self imposed weight limit. That was originally 10%, then twice the median and now is 1.5 times the median holding value, approximately 4.5%.

Doing that on a portfolio basis would be impracticable, as shares leave the portfolio for a variety of reasons.

TJH

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Re: HYP1 is 21

#461224

Postby 1nvest » November 26th, 2021, 4:06 pm

Sometimes the outcome is better than my actual holding, sometimes it is worse.

I suspect it would easiest to simply assume the two styles, non-tweaked and tweaked, might broadly be expected to yield the same outcome on average.

Consider 15 initial equal weighted where each year three drop 33%, three rise 50%, the rest collectively 0%. Rebalancing back to equal weightings and compounding for ten years might be little different to a set of 15 bought and held where three increase three-fold, three halve.

On a after costs/effort basis the non-tweaked is the more cost/effort-effective, but does lead to being more heavily weighted in a small number of the holdings.

In the case of HYP1 I'm seeing a above average right tail outcome, more good cases than expected. For others, HYP3 for instance, saw more average/below-average right tail cases.

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Re: HYP1 is 21

#461322

Postby tjh290633 » November 26th, 2021, 11:42 pm

I am back home now and can share the comparison between my present holdings and a single holding bought at the same time and unchanged, except for corporate actions:

.                                .   Tinkered    1 share
EPIC Share IRR IRR
ADM Admiral Group plc 15.24% 15.54%
AV. Aviva plc 5.66% 5.47%
AZN AstraZeneca plc 16.03% 9.12%
BA. BAe Systems plc 11.06% 5.29%
BATS British American Tobacco plc 7.60% 8.22%
BLND British Land plc 5.41% 5.46%
BLT BHP Billiton plc 6.79% 4.71%
BP. BP plc 8.99% 11.12%
BT.A BT Group plc 8.91% 12.61%
CPG Compass Group plc 12.98% 8.28%
DGE Diageo plc 15.89% 15.89%
GSK GlaxoSmithKline plc 7.84% 7.80%
IGG IG Group Holdings plc -9.28% -8.31%
IMI IMI plc 44.06% 12.32%
IMB Imperial Brands plc 21.28% 14.56%
KGF Kingfisher plc 7.21% 6.77%
LGEN Legal & General Group plc 12.76% 12.70%
LLOY Lloyds Banking Group plc 17.08% 10.39%
MARS Marstons plc 2.31% 4.23%
MKS Marks & Spencer plc 7.12% 11.38%
NG. National Grid plc 13.58% 10.13%
PHP Primary Health Properties plc 4.40% 4.22%
PSON Pearson plc 1.32% 2.49%
RB. Reckitt Benckiser Group plc 11.70% 10.02%
RDSB Royal Dutch Shell plc B 5.85% 5.50%
RIO Rio Tinto plc 31.07% 24.94%
S32 South32 Ltd 11.35% 11.99%
SGRO Segro plc 10.53% -7.51%
SMDS DS Smith plc 13.57% 7.37%
SSE Scottish & Southern Energy plc 10.81% 10.22%
TATE Tate & Lyle plc 12.11% 2.26%
TSCO Tesco plc 6.93% 7.99%
TW Taylor Wimpey plc 4.54% -2.10%
ULVR Unilever plc 10.24% 10.24%
UU. United Utilities Group plc 10.14% 8.97%
VOD Vodafone Group plc 4.73% 6.76%

You can see the differences.

TJH

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Re: HYP1 is 21

#461351

Postby Arborbridge » November 27th, 2021, 8:37 am

tjh290633 wrote:I am back home now and can share the comparison between my present holdings and a single holding bought at the same time and unchanged, except for corporate actions:


You can see the differences.

TJH


Just eyeballing that, it looks as thought you are just on the "right" side, having gained overall. Less difference than I would have thought, which might mean your basic choices were sound in the first place.

This doesn't include all shares you've owned though, only the currently owned.


Arb.


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