OLTB's HYP - 5th Anniversary

[OLTB]

Afternoon all

Here's the results for the last 12 months of my HYP and income looks to be very slightly better compared to last year (but that might simply be because of the few top-ups I've made)

As a reminder, my plan is to work until age 64 (it was age 62 originally, but I don't think that is now realistic) and as well as the HYP here, I also have passive and IT portfolios that are designed for growth. At age 64, I will use my workplace pension (a separate pension pot) to drawdown on until exhausted (the pension, not me) and give me a decent income for three years until my State Pension kicks in at 67. This gives me a 15 year timeframe (to age 67) to work to before I need to draw on my HYP and other passive/IT funds, and hopefully the plan will come together. The HYP is being designed to cover my fixed living costs/direct debits (I increase these annually at an assumed 3.5% inflation rate and then adjust accordingly when the actual inflation rate is declared). I originally had an 'income' target for the HYP which included not only the direct debits, but also some other regular costs as well. I decided to re-focus on direct debits only as I didn't think it was realistic that the income figure would be achieved, however, I decided to keep the target on the chart just to see how close I would have got to my target (and it may be useful for others seeing how a working HYP actually performed in this way). The IT/passive plans and State Pension should cover food/petrol and discretionary spending. Mrs OLTB's Defined Benefit pension income is not taken into account as it's relatively low and apparently out of bounds. The annual running total at the end of the fifth anniversary (and previous years for reference) for my HYP are as follows:



I have made a few top-ups this year (the 'Oil' companies mainly) as well as a 'forced' top-up when I declined the TUI Subscription Rights - the cash was instead re-invested equally into BP and GSK. My HYP portfolio currently is as follows:



I hope that some find this useful and if IG Group (IGG) continue their onward romp in terms of capital, I might need to top-slice at some future point (but that is some way off for now - I just have it on my radar). Comments, as always, very welcome.

Cheers, OLTB.

[idpickering]

Thanks for sharing your HYP, and its’ management, with us.

So far so good.

All the best,

Ian.

[monabri]

That 1.3% figure for MRCH looks a bit light unless you've been topping up? Shouldn't MRCH be transferred to your IT portfolio?

I wonder when dividends will be reinstated at ITV and TUI...I suspect that the former will be the first out of the two.

5 Years...whoosh!

[OLTB]

That 1.3% figure for MRCH looks a bit light unless you've been topping up? Shouldn't MRCH be transferred to your IT portfolio?

I wonder when dividends will be reinstated at ITV and TUI...I suspect that the former will be the first out of the two.

5 Years...whoosh!

Whoosh indeed monabri! I can't quite believe it and I'm sure that the next five years will also whoosh by.

I have not held MRCH for the same period of time and only brought it into the HYP when GNK was sold (and I wasn't confident on choosing a replacement) and topped it up again when I elected to sell United Utilities. I'll have a look at the percentages again as you're right, it doesn't look correct.

ITV and WPP have also not been running for the full five years as these were brought in when SKY was sold to Comcast and the proceeds were divided between the two. WPP has hobbled along and seems to be in a fairly stable financial situation - I'm not too sure what will happen to ITV dividend-wise (certainly nothing more this year). TUI is now too small capital-wise to make any sort of meaningful difference so I'll just hold on to it and see what happens (no new money is going there for the foreseeable future).

Cheers, OLTB.

[Gengulphus]

Out of interest in more details of the history of OLTB's HYP, I've tracked down its previous anniversary posts. For the benefit of anyone else who's similarly interested, here are links to them:

1st anniversary (income only) plus a short note on capital
2nd anniversary
3rd anniversary
4th anniversary

I didn't try to find all threads about his HYP (the tracking-down would have taken quite a bit longer if I hadn't been able to restrict my attention to Augusts!), and of those I did notice in passing, I ignored all but the obvious addendum to the 1st anniversary report. And I'd have liked to include a link to the original post setting up the HYP - but that happened in August 2016, before TLF was set up, so has probably been lost with the TMF boards. And although it might have been archived on http://www.archive.org by someone, I have no idea whether it actually was, and even if it was, my skills at searching that site are definitely not up to the job of finding it!

Gengulphus

[OLTB]

Out of interest in more details of the history of OLTB's HYP, I've tracked down its previous anniversary posts. For the benefit of anyone else who's similarly interested, here are links to them:

1st anniversary (income only) plus a short note on capital
2nd anniversary
3rd anniversary
4th anniversary

I didn't try to find all threads about his HYP (the tracking-down would have taken quite a bit longer if I hadn't been able to restrict my attention to Augusts!), and of those I did notice in passing, I ignored all but the obvious addendum to the 1st anniversary report. And I'd have liked to include a link to the original post setting up the HYP - but that happened in August 2016, before TLF was set up, so has probably been lost with the TMF boards. And although it might have been archived on http://www.archive.org by someone, I have no idea whether it actually was, and even if it was, my skills at searching that site are definitely not up to the job of finding it!

Gengulphus

Thank you Gengulphus - I will remember to set up a link next year to this one so a continuous record can be found for those who might find it useful.

Cheers, OLTB.

[Wizard]

Target income reduced and timeframe to drawing it extended. You seem a sensible and diligent person, so I am sure you set your expectations based on some historical analysis. Therefore, do you think this is down to historically based expectations of the likely performance of an HYP not playing out in the period since 2016 or under performance of the shares in your portfolio?

[OLTB]

Target income reduced and timeframe to drawing it extended. You seem a sensible and diligent person, so I am sure you set your expectations based on some historical analysis. Therefore, do you think this is down to historically based expectations of the likely performance of an HYP not playing out in the period since 2016 or under performance of the shares in your portfolio?

Hi Wizard and thanks for your comments. I have reflected many times on my initial exuberance when I started the HYP. My plans were to re-invest dividends generated back into the HYP and that was what happened initially. However, after experience in running the HYP and looking at my other portfolios (passive and Investment Trust) I started to re-invest dividends into these portfolios instead. The reason for this is because I wanted to boost the growth returns on these portfolios to ultimately help with my retirement. The plan will be for these two portfolios to be converted to income portfolios - I will choose an income portfolio of Investment Trusts rather than HYP. It might be that I reach my target level of savings before age 64 and I might have to think about stopping work earlier than anticipated but until then, it’s 64. I have always said that I chose three portfolio styles (HYP / IT / Passive) because I didn’t know ultimately what would be the best one for me - HYP has certainly delivered an increasing income (given a slight decrease last year) and both passive and IT have delivered growth (passive portfolio performing better than IT). I therefore think it’s my personal decision to not reinvest income solely into HYP that has changed my target income goals rather than HYP returns being lower than anticipated. It’s an ongoing thought process and with 15 years to go until I need to draw on income, I assume that my thoughts will become clearer as the portfolios develop and mature.

Cheers, OLTB.

[Wizard]

Target income reduced and timeframe to drawing it extended. You seem a sensible and diligent person, so I am sure you set your expectations based on some historical analysis. Therefore, do you think this is down to historically based expectations of the likely performance of an HYP not playing out in the period since 2016 or under performance of the shares in your portfolio?

Hi Wizard and thanks for your comments. I have reflected many times on my initial exuberance when I started the HYP. My plans were to re-invest dividends generated back into the HYP and that was what happened initially. However, after experience in running the HYP and looking at my other portfolios (passive and Investment Trust) I started to re-invest dividends into these portfolios instead. The reason for this is because I wanted to boost the growth returns on these portfolios to ultimately help with my retirement. The plan will be for these two portfolios to be converted to income portfolios - I will choose an income portfolio of Investment Trusts rather than HYP. It might be that I reach my target level of savings before age 64 and I might have to think about stopping work earlier than anticipated but until then, it’s 64. I have always said that I chose three portfolio styles (HYP / IT / Passive) because I didn’t know ultimately what would be the best one for me - HYP has certainly delivered an increasing income (given a slight decrease last year) and both passive and IT have delivered growth (passive portfolio performing better than IT). I therefore think it’s my personal decision to not reinvest income solely into HYP that has changed my target income goals rather than HYP returns being lower than anticipated. It’s an ongoing thought process and with 15 years to go until I need to draw on income, I assume that my thoughts will become clearer as the portfolios develop and mature.

Cheers, OLTB.

Thanks for the explanation. Makes perfect sense, if there is less compounding benefit in the HYP and it relies purely on, what you could call, 'organic income growth' i.e. the increase in the dividends being paid by the constituents, then growth in income will be considerably slower than otherwise. That said, my personal view is that a focus on capital growth is more appropriate during the build / pre-drawdown phase so I understand why you have adjusted your approach as you have. My conclusion has, for some time, been that HYP is an appropriate approach to be considered as an income source in the drawdown phase.