HYP1 is 20

[1nvest]

Dod

I do not mind being called wrong if you have some evidence to prove that that is so, but since I am simply voicing my opinion, I do not think it is a matter of right or wrong.

Dod

You said;

"The overriding outcome to me is that it is now so unbalanced as to be absurd as I have already said and no one would allow it to get into such a position in real life."

I know of at least one real life example which makes your statement wrong. Maybe if you had said "IMO no one would allow..." but you didn't, you stated it as a matter of fact.

The main point I am making is that we have evidence that the strategy observed by HYP1 can work to deliver a better overall performance than the underlying index. There is no evidence that I'm aware of to the contrary.

Most people in the World of finance would see that sort of performance as very good.

BoE

Thanks BoE. You have now clarified your point. OK, so in my opinion if there are others who in real life follow this strategy I would not want to put my funds with them.

As an income strategy it may be delivering on the income but surely no one would argue that it is a high risk strategy to rely on so few shares to produce most of that income.

Dod

But that's the natural characteristic of HYP1 style. 15/whatever initial equal weighted will tend to transition to half/quarter/whatever having done relatively well, the rest relatively lagging. Somewhat as though 15 initial equal weighted/diverse had transitioned to being 7, with 8 others that clumped together make up a 8th holding ... type portfolio. Still reasonably diversified despite two or three decades having passed.

The stock(s) that go on to be the best/highest weighted will also tend to be contributing the most of ££ capital dividend value. In having held/run those winners the tendency will be for both capital and dividend income having outpaced inflation. If a nasty event saw the largest weighted holding totally lost then the capital and dividend income £££ values would of course fall back, but could still see both capital and dividend £££ value having paced/exceeded inflation, or maybe marginally having lagged inflation.

I've heard before that had the Dow and/or S&P500 original holdings simply been bought and held then that outperformed the conventional indexes i.e. tweaks/changes induced lag. I see similar for HYP for instance HYP1 non tweaked compared to TJH HYP accumulation (tweaked) has seen the total returns of the latter relatively lag.

Another example if US LEXCX, formed in 1935 by buying 30 stocks but using equal number of shares of each instead of equal capital weightings. More recently those original 30 have transitioned over to being just 19 holdings of which Union Pacific (railroad) makes up near half of the total portfolio value. The gains however that saw UNP rise to being the lion share, even if totally lost, would still see the portfolio having made OK gains/rewards. Running winners rather than cutting/top-slicing them tends to work out OK, but provides a impression of concentrated risk.

Here's another example, a bunch of 10 US holdings, where if you click the asset "allocation drift" tab around a third of the way down that link you'll see how MSFT rose to be the lion share of the portfolio. Wipe out that share/capital totally, as though MSFT recently totally failed, and the remainder portfolio value/gains will still have been OK.

A factor is however the actual income £££ value. If that was 'enough' at the start then inflation paced uplift of that should conceptually still be enough. But if its risen ahead of inflation due to one/few stocks doing very well such that income (and capital value) rose substantially ahead of inflation, then if that/those greatest performer(s) did collapse/fail such that income fell back to having just paced inflation then that could still be considered as having been successful, but not if you had increased your spending in reflection of having seen dividend income rise ahead of inflation.

I believe for instance that the inflation adjusted dividend ££ income value from HYP1 in November 2000 compares to the dividend ££ income value to the "HYP1 is 20" £££ amount, despite that income being considered as having seen a substantial cut/decline. Some who don't seem to 'get-it' as that still being successful instead proclaim it to be HYP1 having failed. Similarly the concentration into fewer stocks is suggested by some as being a risk/failure but is actually just a standard characteristic of the non-tweaked buy-and-hold style/approach.