ReallyVeryFoolish wrote:
The snag for me, despite me never, ever, wanting to invest in high yielding junk equities of which the FTSE has many, I bought a small selection of deep blue chip income stocks.
And now look what's happened.
Unprecedented in any previous equity slump as far as I know.
With all that's been written about the current issues with many high-yield shares, I think we do need to be a bit careful and acknowledge that we're only part-way through this particular story-arc at the moment, and whilst it's clear that there is likely to be quite severe 'income-shocks' to some of our portfolios, the one thing that's
not yet clear is just how deep or how prolonged that income-shock is going to be...
If it's a relatively short, sharp shock, with a medium-term recovery in those dividends and share-prices, and if it turns out that a decent level of 'Income Reserve' and 'Safety Margin'
would have been adequate to ride through such a storm, then I'd suggest that the overriding lesson should be about the clear recognition that such risk-management aspects
should always play an intrinsic part in an income-investment strategy like this, and not
necessarily that the underlying income-investment strategy itself is inadequate...
Of course it's likely to feel that way
now, as we're sitting in the slump of the issue, but surely it must also feel that way for many 'total-return' investors too, who have equally seen 'current issues' with their own approach to such matters, when viewed against the current market-volatility, but I think it's safe to assume that huge number of 'total-return' investors
will know quite well that they themselves also need to cater for things like cash-reserves too, for exactly the same reasons as
any particular investment-strategy at all is likely to have to mitigate for...
So I honestly think that these sorts of discussions should perhaps be less about the 'death of HYP', and much more around the
real embodiment of the sorts of risk-management processes that should have been built in and clearly explained from the outset...
Cheers,
Itsallaguess