88V8 wrote:[muse]Those who balance - not me - generally seem to use capital as the metric.
Much less faff than assembling income data of course.
But an HYP is about income.
So it's always struck me as a little odd.
I wonder if anyone uses income rather than capital and how it affects the outcome.
A Portfolio Management topic perhaps, or is it Practical... but not a Topic for me to start as I don't have any data to contribute.[/muse]
V8
I assume that you mean people who use income as a guide to rebalancing.
I do that by tending to cull shares which do not provide income and also those which provide less than about half the current market yield (taking the FTSE100 as the Market). I am not doing the latter at the moment, because we are not in normal times.
I also set a limit on share of income, so that any share, which would provide more than 5% of total portfolio income if topped up by 20%, is disqualified from being topped up. That means a cut-off point at about 4.2% share of income. I also apply this to share of portfolio cost.
This is my top-up table as it stands at present:
Top-up Income Cost
Rank EPIC Rank EPIC % Income Rank Epic % Cost
1 IMB 1 RIO 5.98% 1 AV. 4.49%
2 BATS 2 LGEN 5.06% 2 VOD 4.23%
3 VOD 3 IMB 4.94% 3 PSON 4.19%
4 TW. 4 BATS 4.76% 4 BP. 4.18%
5 BP. 5 AV. 4.64% 5 RDSB 4.18%
6 RKT 6 VOD 4.18% 6 LLOY 4.13%
7 SSE 7 GSK 4.17% 7 MARS 4.09%
8 GSK 8 NG. 4.13% 8 IGG 4.06%
9 ULVR 9 ADM 3.93% 9 BT.A 3.94%
10 LGEN 10 SSE 3.91% 10 MKS 3.78%
11 BT.A 11 IGG 3.80% 11 GSK 3.61%
12 RDSB 12 BP. 3.38% 12 PHP 3.58%
13 RIO 13 BA. 3.32% 13 S32 3.49%
14 TSCO 14 UU. 3.29% 14 TSCO 3.47%
15 MKS 15 TW. 3.23% 15 BLND 3.41%
16 BLND 16 BHP 3.11% 16 BHP 3.31%
17 PHP 17 RDSB 3.04% 17 LGEN 3.21%
18 LLOY 18 TATE 2.99% 18 SSE 3.08%
19 TATE 19 BT.A 2.89% 19 KGF 2.96%
20 CPG 20 PHP 2.87% 20 IMB 2.90%
You will observe that the top 5 shares in the "% Income" column are excluded and also the top 2 in the "% Cost" are excluded. Why impose a limit? In the case of Income it is to avoid becoming too reliant on any one share, while in the case of Cost, it is to avoid throwing too much money at a given share. I found myself doing both of these at one time and so imposed my rule.
So the top 3 in the top-up table, IMB, BATS and VOD, are disqualified as are numbers 10 (LGEN) and 13 (RIO). I could stretch a point in the case of Vodafone were I so minded.
The top-up ranking itself is a two-component item, made up of the sum of the ranking by yield and the inverse ranking by weight. Looking at the top 3, IMB ranks 5th for weight and 1st for yield, 6 in total. BATS ranks 7th for weight and 2nd for yield, 9 in total. VOD ranks 8th for weight and 4th for yield, 12 in total. The total of the two rankings is then ranked to provide the top-up ranking. Here is the complete table:
Holding Weight Yld W+Y Rank
ADM 27 12 39 23
AV. 35 9 44 28
AZN 16 26 42 26
BA. 24 15 39 24
BATS 7 2 9 2
BLND 13 23 36 16
BHP 33 10 43 27
BP. 12 14 26 5
BT.A 15 17 32 11
CPG 2 36 38 20
DGE 32 29 61 34
GSK 23 6 29 8
IGG 25 13 38 21
IMB 5 1 6 1
IMI 36 32 68 36
KGF 29 28 57 33
LGEN 26 5 31 10
LLOY 4 33 37 18
MARS 6 35 41 25
MKS 1 34 35 15
NG. 30 8 38 22
PHP 17 19 36 17
PSON 34 27 61 35
RKT 3 25 28 6
RDSB 11 22 33 12
RIO 31 3 34 13
S32 18 31 49 31
SGRO 22 30 52 32
SMDS 20 24 44 29
SSE 21 7 28 7
TATE 19 18 37 19
TSCO 14 20 34 14
TW. 10 11 21 4
ULVR 9 21 30 9
UU. 28 16 44 30
VOD 8 4 12 3
The version of that, sorted by the final ranking, is what is in the top-up table itself.
Income plays an important part in the selection of shares for purchase, for topping up and for culling.
TJH