HYP3 construction details

[Gengulphus]

In case they're of interest, I've tracked down links to archived copies of 2/3rds of the articles in which pyad constructed HYP3. It was constructed in a series of 15 mostly monthly articles, between May 2005 and August 2006. The first five of them appeared in a TMF subscription newsletter called "Value Investor" (a name I failed to remember, but was reminded of by one of the links I found for this post), that TMF cancelled in September 2005. Electronic versions of those articles may have existed for subscribers (I think they did, but that's a very uncertain memory!). They might even have been archived at some point, but it seems quite unlikely as a subscriber would have had to initiate the archiving process and even if one did, I suspect it wouldn't have worked because http://www.archive.org wouldn't have been allowed to access it. In any case, I've no idea where to even start looking for such an archived copy... (Not-very-intentional physical archived copies are more likely, in fact: I was a subscriber up until the point it was cancelled, and my copies of the printed newsletters are probably still in a pile of papers somewhere, as I don't think I've ever got around to chucking them out. Locating them is another matter, though, and is a task that I'm not particularly inclined to take on - and certainly won't in the near future.)

Anyway, after a month's hiatus, pyad restarted the construction of HYP3 in his regular TMF articles and completed it in the next 10 months, from November 2005 to August 2006, both ends inclusive. Links to the selection articles that I've tracked down are provided in the following list; unlinked selections are known because they're mentioned in later months' articles:

May 2005: Lloyds TSB
June 2005: United Utilities
July 2005: Alliance & Leicester
August 2005: DSGI
September 2005: Legal & General
November 2005: BT
December 2005: Rank (subsequently replaced by William Hill - see below)
January 2006: F&C Asset Management (subsequently replaced by Vodafone - see below)
February 2006: Rentokil Initial
March 2006: Scottish & Newcastle
April 2006: Gallaher (subsequently taken over and replaced by British American Tobacco - see below)
May 2006: Roval Dutch Shell (RDSB)
June 2006: Unilever
July 2006: Pearson
August 2006: ITV

There was also a piece of 'tinkering' activity between the April 2006 and May 2006 selections, in which Rank was sold and William Hill purchased to replace it, and a later piece of 'tinkering' activity in March 2007, in which F&C Asset Management was sold and Vodafone bought. (The latter also affected HYP4, though the replacement in HYP4 was British American Tobacco rather than Vodafone - presumably pyad judged British American Tobacco the better HYP share at the time but didn't choose it for HYP3 because HYP3 already had the tobacco share Gallaher, but judged Vodafone's business activities to be sufficiently different from BT's. It didn't make much difference, though, as Gallaher was on the brink of being taken over and its obvious replacement at the time when that takeover completed a month or two later was British American Tobacco - and HYP3's August 2007 review linked to below confirms that that was indeed its replacement.)

There were a number of reviews published of HYP3 after it was completed and before pyad left TMF in early 2008 (but none I'm aware of after he returned to TMF in the spring of 2009) and some of them were after it had had a full year's worth of dividend production. The reviews I'm aware of are:

October 2006
January 2007
April 2007
August 2007 (HYP3's 1st birthday review)
October 2007
February 2008 (also includes the one and only review of HYP4 I'm aware of)

Gengulphus

[MrFoolish]

What happened to your own demo HYP, Gengulphus?

[Wizard]

I think a monthly purchase of each new share is a somewhat odd schedule for building an income portfolio. If somebody had all the cash to build the portfolio at the outset then they would likely build it more quickly. If the portfolio was being built from accumulated income over time it is hard to envisage a new share being bought each month unless the purchases were not material compared to the level of income. But it is understandable as a timetable for a series of published articles.

[dealtn]

I think a monthly purchase of each new share is a somewhat odd schedule ...

I think it's a timeframe designed around a journalistic production schedule. Do you think it's real? Do you think a more realistic annual posting frequency for a publication was more feasible? I think that would be more odd.

[Arborbridge]

I think a monthly purchase of each new share is a somewhat odd schedule for building an income portfolio. If somebody had all the cash to build the portfolio at the outset then they would likely build it more quickly. If the portfolio was being built from accumulated income over time it is hard to envisage a new share being bought each month unless the purchases were not material compared to the level of income. But it is understandable as a timetable for a series of published articles.

I had the cash, but I also built my HYP over a long time - though not admittedly on a strict monthly schedule.
There were two reasons for my decision: a) I had no previous knowledge of HYP, so I was feeling my way, b) the market I thought looked particularly difficult in 2006-7 (that's when I received a pension pot to invest) so I wanted to spread my input over a couple of years. Indeed, I took until January 2010 to announce that I felt my HYP had been fully implemented - at the same time beginning unitisation.

My timed purchases led to a particular distortion as follows: I made a simple mistake about how much I wanted to put into HYP, and initially bought far too many shares in Aviva, with the sad consequence that I bought too big a holding when that company's share price was particularly high.
If I had gone in with the correct lower holding, my topups later would have worked much better and I would have emerged from underwater more quickly. As it was, I took seven years to show a positive return - an example of timing the market beating time in the market.

Arb.

[SDN123]

I think a monthly purchase of each new share is a somewhat odd schedule ...

I think it's a timeframe designed around a journalistic production schedule. Do you think it's real? Do you think a more realistic annual posting frequency for a publication was more feasible? I think that would be more odd.

Nothing to do with PYAD but I built the start of my HYP a month at a time. Actually I started by saving up and then buying four in a “lump” and then as each monthly salary cheque arrived I bought a new share until I got to around (from memory) 15ish. After that things became a bit more organic. Not saying that’s how everyone should start - just how circumstances worked out for me.

SDN

[SDN123]

I should say that my monthly top ups were nowhere near £5k a month - however I did make sure that no purchase cost more than 1% in fees etc (including stamp duty) so I was a heavy user of “regular investing” deals etc.