HYP - FAQ, is there one?

[Gengulphus]

I would prefer that we start a "new" slate and move on from PYAD's originals as, to my mind, HYP has evolved. No problem in referring to them in threads/topis/posts but keep them away from any new FAQ's.

Well, if people really want to abandon nearly 17 years of near-real-life experience of how a HYP run in one particular way (or two variants of it from about 2008 onwards) actually performs in practice, I'm OK with saving myself the effort of making it available. But just in case the offer has been misinterpreted:

* I have no intention of writing a "This is how a HYP ought to be run" FAQ that purports to give the one true way - there's enough variation in what HYPers do that in my view any such post is doomed as a FAQ from the start because far too few board users will agree with it.

* I also have no intention of writing a "This is what HYP is and isn't" FAQ - i.e. something like TMF's "HYP Practical" FAQ that spelt out a few basic requirements of how a strategy ought to behave to be described as a HYP strategy, but left a considerable number of details about exactly how it should be run open so that it matches a good variety of individual HYPers' strategies. I do think that in the long term either you will want to combine the two boards into a single "High Yield Share Investing" board or you will find that such a FAQ is needed. But I'll leave that as if-and-when-you-feel-the-need decisions, and if such a FAQ is ever produced, my contribution to it will be no more than reviewing someone else's efforts (sorry, but I've done the task of drafting such a thing once at TMF and do not feel motivated to repeat it!).

* I am willing to write a "Here is a historical record of how HYP1 and CHYP1 have been run, so that you can look at the results and judge them for yourselves - warts and all" FAQ (and there most definitely are warts!).

And by the way, with regard to "HYP has evolved", I've seen quite a few people saying that, but I don't really agree. I do recognise that various people's strategies have evolved, and in some cases have evolved to being something qualitatively different from HYP. But when that happens to a great enough extent, it's sensible to start using a new term, not to go on using the old one but change its meaning in the process: that just creates confusion for everybody - especially when different people's strategies are evolving in different directions and by different amounts... So basically, I'd say that some people's strategies are evolving, e.g. towards greater use of ITs and other funds, or towards being less focused on holding long-term and more on getting out of companies and sectors perceived as toxic, but that is more accurately described as their strategies evolving away from HYP and towards something else than as what the term "HYP" means evolving. In particular, I've seen both of those directions of evolution, which is rather odd when viewed as "HYP" evolving as they're diametrically opposite directions (one towards even less active management of individual shareholdings than HYP, the other towards more active such management) but makes perfect sense when viewed as different people's strategies evolving in different directions in response to their individual needs and preferences.

Gengulphus

[DiamondEcho]

Both these points highlight the recurring problem with discussing high yield investing here (and previously at TMF). There are clearly a number of people who wish to keep the discussion on this board within its original "rules" and, as that is what the board was set up for, that really should be respected. ...
HYP should have its own board and specific rules, but there seems to be a majority of people (posting, at least) who would like to broaden the conversation - the question is where else to take it so that it isn't to the detriment of the exchange of ideas and information?

This is why the original HYPers agitated to get some of the OT chat onto it's own board, many years ago. That why there is HYP-Practical, and more recently HYP-Share/Strategies.

The reason for the split was as clear then as it is now. People running a 'truer HYP' want it focused, those who add in and want to discuss variants can do it in their own space. If you own some kind of hybrid then perhaps for the sanity of the HYPers you need to do it across two boards; surely a hybrid is at home on HYP-Strategies, it's why it was set up? Perhaps the lines have just become blurred, and clarity would come from better self moderation such as this?

[DiamondEcho]

If no one 'dares' note down the original HYP metrics as were, then tomorrow I'll dig them out and do so. I almost get a feeling that some people don't want to be reminded

[Breelander]

If no one 'dares' note down the original HYP metrics as were, then tomorrow I'll dig them out and do so. I almost get a feeling that some people don't want to be reminded

For those that do (or are just feeling nostalgic) this is as good a place as any....
https://web.archive.org/web/20161228113 ... portfolio/
(now only available in the Wayback Machine - when TMF dumped the boards they took the opportunity to delete all the old articles as well)

[Grumpsimus]

* I am willing to write a "Here is a historical record of how HYP1 and CHYP1 have been run, so that you can look at the results and judge them for yourselves - warts and all" FAQ (and there most definitely are warts!).

And by the way, with regard to "HYP has evolved", I've seen quite a few people saying that, but I don't really agree.

Gengulphus

I fully support your offer to write a record of how HYP1 and CHYP1 has been run, as this gives the essence of HYP investing which can be seen as a strategy of masterly inactivity compared most investing. It is unlikely that there will every any agreement on how HYP has 'evolved', if indeed it has. At its core it is a simple Long Term Buy and Hold strategy, selecting HY shares and aiming for income rather than Capital growth. A lot of people seem to have trouble with this concept, worrying about Capital growth, adding ITs for safety, wanting to dump a share at the first sign of bad news etc etc.

One of problems (also formerly on the Fool board) is that the HYP is one the most busy and interesting boards and attracts a lot of people who don't really understand what HYP is and want to discuss what is in their share accounts. Just because you have some HY shares and some ITs it doesn't make it a HYP. I see nothing wrong with holding ITs, but to me this makes it an IT portfolio and seperate HYP portfolio. I think the recent poll on the number of shares in your HYP, clearly demonstrated the confusion in some peoples minds - can anyone really have an 80 share HYP?

One of the best bits of advice I was given many years ago was to write down the reason you buy a particular share. Then you can look and see if you were right, often you won't be! But it helps to have a clear view of what you are attemping to achieve, it could be growth, smallcaps, Income or short term trading. It also helps if you hold them in seperate accounts, so that you can track them easily.

[CryptoPlankton]

Just because you have some HY shares and some ITs it doesn't make it a HYP. I see nothing wrong with holding ITs, but to me this makes it an IT portfolio and seperate HYP portfolio.

I don't think anybody has said it does makes it a HYP. But, to me, there is no useful purpose in disentangling my thirteen IT's from my twenty five so-called HYP shares (a Real Estate Investment Trust is a share rather than an IT for this purpose, right? ) when together they form a coherent and balanced income portfolio.

I have seen it written about so many times over the years that I am in little doubt about what is appropriate/acceptable for this board. I would imagine the same goes for just about every seasoned Fool. However, it seems obvious that newbies do need some kind of explanation of HYP flagged up prominently to prevent them from (quite understandably) thinking it's somewhere to simply talk about the practical side of running high yield portfolios in general.

(I don't think I made my earlier point clearly enough, but it was not really on topic for this thread so I'll let it rest - perhaps I should ask for a FAQ over on" High Yield Share Strategies - General" )

[Itsallaguess]

People running a 'truer HYP' want it focused, those who add in and want to discuss variants can do it in their own space.

Which would be fine if this were the case, but it always seems to me that 'people running a truer HYP' only want this until it suits them to discuss tangential issues on this board themselves...

I might have given the impression that it's the fact that discussions around Investment Trusts aren't welcome on this board that's the reason I don't contribute as much as I'd like to here, but that's absolutely not the case.

It's the regular double-standards displayed by many of those that want to stop me discussing those investments that puts me off getting more involved....

I think if anyone on this board has ever raised the 'off-topic' flag in one of their posts on HYP Practical, then they really do need to ensure that they themselves display the same rigidity that they very often like to impose on others....

Cheers,

Itsallaguess

[idpickering]

If no one 'dares' note down the original HYP metrics as were, then tomorrow I'll dig them out and do so. I almost get a feeling that some people don't want to be reminded

I'd welcome you doing so DE. I for one am happy to reread those items, maybe even every now and again, as a reminder of the original idea. Also it reminds me of how my eyes were suddenly opened by Stephen Bland's ideas, and I began 'doing it for myself'. I have no regrets in beginning my HYP journey all those years ago.

Ian.

[idpickering]

I have seen it written about so many times over the years that I am in little doubt about what is appropriate/acceptable for this board. I would imagine the same goes for just about every seasoned Fool. However, it seems obvious that newbies do need some kind of explanation of HYP flagged up prominently to prevent them from (quite understandably) thinking it's somewhere to simply talk about the practical side of running high yield portfolios in general.

I agree with your comment above CrptoPlankton. That is why I suggested having a link on this board to the original HYP items written by Stephen, so newbies, and the more seasoned other HYPers who'd like to read them again, could do so, without having to hunt for the information.

Ian.

[Dod101]

This whole issue is an excuse for a lot of hot air and very little progress. That can be seen from the number of responses so far. There will always be some who want the original pyad 'rules', the purists or hardliners, and there will be many others, myself included, who, whilst agreeing with the concept of deriving an income from dependable high yielding shares, differ profoundly from some of his ideas such as Strategic Ignorance and never selling a share however poorly it performs.

Why on earth open up this whole topic again? Meanwhile the world goes round and most of us living off our dividends are quite content.

I could make up my own guidance notes which work for me. Stick to a few tried and tested shares which provide a decent and dependable income . They are mostly high cap shares. The actual number if you stick to London quoted shares will probably be no more than 20 or so. Supplement with some income ITs. If a share's dividend is cancelled sell the share, not necessarily immediately, but do not keep for the recovery and sell on a serious profit warning. Do not chase yield. I could go on but then you are on your own as it becomes a matter of judgement; investment is more art than science and cannot be reduced to a set of rules.

Simple really.

Dod

[TUK020]

I think that it would be helpful to acknowledge that there are 'core pyadic' HYP principles, and that then there are a number of variations on a theme that have developed that attract a diversity of opinion. We don't have to go down the 'Peoples Front of Judea" attitude to this.

HYP Strategies FAQ
-------------------------

Core Pyadic
- High Yield,
- Risk reduction through diversity of sectors
- LTBH
- Margin of safety on dividend, proven yield record, interest cover
- Strategic Ignorance - assume you will know less about the future of companies that the market

Variation on a theme 1
Dorisian run your winners, vs. Terry Tinkering rebalancing

Variation on a theme 2
Expand your diversity through larger portfolios
Expand your diversity (geographic etc) through ITs at the margin

Variation on a theme 3
When to sell: never vs cutters vs wait till the knees stop jerking

Variation on a theme 4
True strategic ignorance vs avoidance of some sectors entirely

What would also be really helpful - not necessarily part of the same exercise, is an FAQ focussed on practical tips about running an HYP strategy

FAQ Practical tips
----------------------
Unitising portfolio
Using software to help top up selection (HYPTUSS)
Screening stocks
Evaluation of interest cover, FCF
etc
etc

[TUK020]

+ Variation on a theme 4
Just go for yield vs Luni some are too good to be true

[DiamondEcho]

* I am willing to write a "Here is a historical record of how HYP1 and CHYP1 have been run, so that you can look at the results and judge them for yourselves - warts and all" FAQ (and there most definitely are warts!).
And by the way, with regard to "HYP has evolved", I've seen quite a few people saying that, but I don't really agree. Gengulphus

Re: 'evolved'. I've suggested that before. What I have in mind is not the overriding principles, but the metrics/benchmarks that are used to sift HYP candidates from the rest. The most obvious one IMO is Market Capn. - if that hadn't materially changed in c15-20 years then the HYP strategy hasn't achieved much eh. IIRC the yield% relates to a 'different economic time' to the one today, so might merit a look. I suppose the aim would be to consider the relative placing of the metrics versus the FTSE-100 when the strategy guidelines were last updated, and see what those metrics would be today.

Also after all these years there is sooo much more data available. I'd hope refreshed HYP rules remain simple, but is there anything that it would be almost willingly foolish to not incorporate in future? Not suggesting there is, but while we're at it...

[Dod101]

TUK says a pyadic principle re SI is 'Assume you will know less on the future of companies that(sic) the market.' I could just about go along with that but that is not as far as I recall what pyad advocates. He advocates that you cannot know the future so do not even try or words to that effect. I agree that the market usually knows more than we do (say in the shape of a continuously falling share price when other things look OK) and that such indicators should not be ignored.

What pray is the point of all this anyway? It has all benne discussed ad nauseum both on TLF and before that on TMF?

Dod

[DiamondEcho]

What pray is the point of all this anyway? It has all benne discussed ad nauseum both on TLF and before that on TMF? Dod

Imagine a newbie joins the forum and asks what a HYP is and how he might go about picking the appropriate shares for such a portfolio. What would be your answer?

[Dod101]

My answer is to read the posts. Someone will soon enlighten him. There are in any case plenty of portfolios posted from time to time.

On the old TMF Boards not once did I read any FAQs and remember asking very early on why anyone would still be holding Lloyds Bank when it was not paying any dividend? That was about 2010 I think. I soon had the (weird) logic explained to me.

Dod

[Gengulphus]

My answer is to read the posts. Someone will soon enlighten him. ...

And a major purpose of a "What is a HYP?" FAQ is to enlighten such newcomers! With the advantages that some effort has gone into giving some sort of consensus explanation rather than one that reflects the biases of whoever happens to be posting about their hobby horses that week, and that the effort goes in once, rather than every time a newcomer comes along...

That is of course if it's done properly, with an author who does their best to be objective and as uninfluenced by their own biases as they can be. And who is also willing to take other people's suggestions on board to further eliminate his/her own biases - which will exist - while being reasonably firm about not allowing those who make the suggestions to push it too far towards their biases... Not an easy balancing act!

And another difficult balancing act is the focus-vs-broad-range-of-discussions one. People have talked about widening the meaning of "HYP" and discussions becoming of interest to more people as though it were an unalloyed good. But it isn't (if it were, we'd have just one "Anything goes!" forum...) and the reason why not is that people will give up on forums that have too much 'noise' and too little 'signal' as they see it. I.e. broadening the subject discussed in a forum doesn't just attract some new posters, it also repels some existing posters...

Gengulphus

[idpickering]

Bravo Gengulphus!! Have a rec/thanks. Well said sir.

[DiamondEcho]

My answer is to read the posts. Someone will soon enlighten him. There are in any case plenty of portfolios posted from time to time.
On the old TMF Boards not once did I read any FAQs and remember asking very early on why anyone would still be holding Lloyds Bank when it was not paying any dividend? That was about 2010 I think. I soon had the (weird) logic explained to me. Dod

Someone posting 'their HYP' doesn't provide an answer to a question such as 'I want to start a HYP soon, what are the metrics for a HYP candidate share, and which currently qualify?'. A parallel would be expecting to take at face-value how someone else has interpreted a book, rather than reading it for yourself.

Your never reading the FAQs on TMF is fine and dandy, but many people did. I'm sure you don't want to deny others the option of reading one; do you, I'm starting to wonder? Apart from guiding some greener future Lemons, it might provide a central set of criteria, the metrics of which could be periodically revisited/updated. Furthermore if anyone wished to periodically compile a 'Top-30' candidates list, per the metrics, I'd hope it would be of interest and perhaps use to many. You would of course be at liberty to simply ignore any such future discussions...

[DiamondEcho]

Of the 17 FAQ articles from TMF, I can only access 6 on the Wayback machine. But, I think what I found might be enough to enable working towards the formulation of selection metrics. From those 6 articles I've condensed down both metrics, like one Market Capn at that time, but also narrative points that I have also found relevant, such as 'Rank the FTSE100 or maybe the 350 shares by descending yield then work your way down, picking a share from each sector. Then do a quick check on the share to make sure that at least in the very near future the yield appears sustainable, preferably rising.'

Across the 6 articles such narrative adds up and would make a looong post. But I'd prefer not to edit anything out that might be useful. DAK the status of copyright on the original TMF articles? The articles on TMF have the following in the footer: '© Copyright 1998-2016, The Motley Fool Limited.' Does that mean copyright is no longer claimed or applicable? If that's so then it would be simple for me to simply copy/paste the part-edited info that I found, as a starting point to be further condensed are far as practical.