Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

HYP1 is 20 - thread discussing income and capital diversification

General discussions about equity high-yield income strategies
Lootman
The full Lemon
Posts: 18674
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6559 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357356

Postby Lootman » November 17th, 2020, 1:15 pm

IanTHughes wrote:
Lootman wrote:A simple investment in a S&P 500 tracker like SPY over the same time period would now give you an investment worth almost exactly £200,000, compared with less than £150,000 for HYP1, before FX. Throw in the FX rate changes and that is £230,000. That is more than 50% more than HYP1.

So, you are correct, and well done, an investment within the S&P index with dividends re-invested, would have beaten HYP1, when measured by total return

You asked for a fund with a superior return to HYP1 and I showed you one. In fact I showed you dozens since any index fund based on that and some other related indices would have given very similar returns.

If you think running a HYP is easier than running a single fund then fine, although personally I cannot see how 15 or 20 holdings along with their corporate actions is easier than holding a single diversified fund.

As for FX risk you have that either way, as UK companies earn most of their earnings overseas as do many US companies. With HYP1 I would be far more worried about the risk of having 80% of the income dependent on a handful of shares, as IAAG showed.

As for cost, major market index funds are approaching zero costs in some cases, and are getting cheaper all the time.

And then there is the income. Well you can work that out for yourself since the S&P 500 has typically yielded between 2% and 2.5%, although it is a little lower now since the US market is at an all-time high, unlike the UK market. But of course there are more ways of drawing funds from a portfolio than limiting yourself to the mere receipt of dividends. In the end a higher total return will give you more income (or more accurately, higher cashflows) because the pot is bigger, over 50% bigger in this case.

Anyway there is something of a Catch-22 here. If HYP1 is beaten on capital you will say "capital doesn't matter", only the income matters. But then when HYP1 loses 47% of its income year-on-year, there is crowing about its capital performance instead.

Although I do give Pyad credit for publishing the report this year. Given its horrific losses, I had a feeling he might duck and cover instead.

SalvorHardin
Lemon Quarter
Posts: 2048
Joined: November 4th, 2016, 10:32 am
Has thanked: 5297 times
Been thanked: 2465 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357368

Postby SalvorHardin » November 17th, 2020, 1:34 pm

Charlottesquare wrote:What I cannot understand from these boards is why people get so invested in one approach, surely using a blended approach one can cover growth, international exposure and still roughly get 4% dividend yield as an income.

IMHO it's because of the way HYP evolved out of the Value Shares board on TMF, which over time has produce the current HYP criteria that the only HYP investments are FTSE100 (and possibly FTSE350) shares which pay a high income. Also the attitude that income producing alternatives should not to be mentioned on HYP-P. Some HYP-Pers don't seem to realise that HYP-G is where people talk about investments that are frowned upon on HYP-P, such as Banks which have paid dividends in every year of the 21st century without any cuts :D

On TMF during the late 1990s and early 2000s, the Value Shares board changed from a place where all manner of shares could be discussed (provided they met a general "value" criteria), to one where if a share did not meet the "PYAD" valuation criteria it would be dismissed automatically. Value Shares routinely derided funds (which rarely met the discount to NAV criteria under PYAD) and foreign shares. "Foreign" at some stage grew to include UK quoted companies which mostly had overseas assets. This was particularly noticeable with certain small oil explorers, which were increasingly dismissed by posters and TMFers as "Bongo Tinpot" (foreign, small company).

Some people on the value shares board were looking for more concentration on income and less on capital growth, and wondered if there was a similar set of criteria to PYAD which could be used to create a high income portfolio. HYP then emerged from Value Shares. So the new HYP board started off with the Value shares board's narrow focus being applied to these HYP rules, which included no foreign shares, no funds and the general avoidance of tinpots. Some posters (and TMFers) were quite zealous in enforcing these rules.

There's also the "Doris factor". Doris, who was often mentioned in HYP articles, had long owned a portfolio which contained large and madium companies, no funds, no foreign shares and Doris never sold anything unless forced to do so by corporate actions.

This attitude carried over to TLF, and if anything the rules seem to be more strictly enforced.

Charlottesquare
Lemon Quarter
Posts: 1775
Joined: November 4th, 2016, 3:22 pm
Has thanked: 105 times
Been thanked: 560 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357411

Postby Charlottesquare » November 17th, 2020, 3:48 pm

SalvorHardin wrote:
Charlottesquare wrote:What I cannot understand from these boards is why people get so invested in one approach, surely using a blended approach one can cover growth, international exposure and still roughly get 4% dividend yield as an income.

IMHO it's because of the way HYP evolved out of the Value Shares board on TMF, which over time has produce the current HYP criteria that the only HYP investments are FTSE100 (and possibly FTSE350) shares which pay a high income. Also the attitude that income producing alternatives should not to be mentioned on HYP-P. Some HYP-Pers don't seem to realise that HYP-G is where people talk about investments that are frowned upon on HYP-P, such as Banks which have paid dividends in every year of the 21st century without any cuts :D

On TMF during the late 1990s and early 2000s, the Value Shares board changed from a place where all manner of shares could be discussed (provided they met a general "value" criteria), to one where if a share did not meet the "PYAD" valuation criteria it would be dismissed automatically. Value Shares routinely derided funds (which rarely met the discount to NAV criteria under PYAD) and foreign shares. "Foreign" at some stage grew to include UK quoted companies which mostly had overseas assets. This was particularly noticeable with certain small oil explorers, which were increasingly dismissed by posters and TMFers as "Bongo Tinpot" (foreign, small company).

Some people on the value shares board were looking for more concentration on income and less on capital growth, and wondered if there was a similar set of criteria to PYAD which could be used to create a high income portfolio. HYP then emerged from Value Shares. So the new HYP board started off with the Value shares board's narrow focus being applied to these HYP rules, which included no foreign shares, no funds and the general avoidance of tinpots. Some posters (and TMFers) were quite zealous in enforcing these rules.

There's also the "Doris factor". Doris, who was often mentioned in HYP articles, had long owned a portfolio which contained large and madium companies, no funds, no foreign shares and Doris never sold anything unless forced to do so by corporate actions.

This attitude carried over to TLF, and if anything the rules seem to be more strictly enforced.


I cannot work out if such strictures, apparently keeping one on the straight and narrow, are a good thing or oppressive, whilst it stops over trading shares, which likely is a sin, it also seems to curtail wider enjoyments; it has a touch of The Church of Scotland, The Wee Frees and the Wee Wee Frees

And the Catch is Doris sounds more akin to a liferenter with an IIP in one of my late father's trusts ,which perversely would have been far more likely to buy ITs than individual company shares. (She also quite likely lived in Morningside or The Grange)

SalvorHardin
Lemon Quarter
Posts: 2048
Joined: November 4th, 2016, 10:32 am
Has thanked: 5297 times
Been thanked: 2465 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357435

Postby SalvorHardin » November 17th, 2020, 5:23 pm

Charlottesquare wrote:I cannot work out if such strictures, apparently keeping one on the straight and narrow, are a good thing or oppressive, whilst it stops over trading shares, which likely is a sin, it also seems to curtail wider enjoyments; it has a touch of The Church of Scotland, The Wee Frees and the Wee Wee Frees

And the Catch is Doris sounds more akin to a liferenter with an IIP in one of my late father's trusts ,which perversely would have been far more likely to buy ITs than individual company shares. (She also quite likely lived in Morningside or The Grange)

The method used by most of the Value Shares posters was strictly based on PE ratio, yield and NAV compared to share price. What the company did was often irrelevant (the origin of HYP'S strategic ignorance, methinks).

When some of us pointed out that the NAV in the accounts of operating companies often bears no resemblence to what the assets were worth, especially for oil explorers, the purists ignored us and we were increasingly told to sod off. Which we did, to the newly established Oil & Gas board, where some of us made fortunes using this information.

Following the rules, even when they were far too rigid and ignored obvious factors, was what counted. Not questioning them.

IIRC, PYAD did Doris' tax return and it was her personal portfolio, not as a life interest trust beneficiary.

Gengulphus
Lemon Quarter
Posts: 4255
Joined: November 4th, 2016, 1:17 am
Been thanked: 2628 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357474

Postby Gengulphus » November 17th, 2020, 7:58 pm

I wrote:Yes, I archived quite a lot of stuff about HYP1 (among other things) in late 2016 and early 2017, after TMF's boards had been closed for posting but before they vanished entirely. I did offer some time back (more than a year ago, I think, and I doubt I can easily find the posts concerned) to post it, but got little or no enthusiasm for the idea, so didn't bother, as it's not an entirely trivial job to convert it from the somewhat cryptic HTML form in which I've got it to readable posts using BBCode.

But now that the subject's come up again and I know that at least one person wants it, I'll try to do that conversion work and post the links I've got. It will probably take some time, and I'm likely to post them in instalments - I'd guess a year's worth of HYP1 history at a time. Also, I'll post it as a separate thread with a subject such as "HYP1 history references", because it would be silly to do the work only for it to be buried deep in a thread like this one where it will probably be quite hard to find in a few years' time...

I've now posted an introduction and the first four years' worth of links, in viewtopic.php?f=15&t=26261. Further years will follow as I get them done - but not until tomorrow because I've had enough of the painstaking work required to assemble them for the time being!

Please do pay attention to what I say in the introduction - it is not a normal discussion thread, and in particular it is intended as a source of links to be used in other threads about HYP1, not as a place to discuss those links!

Gengulphus

Gengulphus
Lemon Quarter
Posts: 4255
Joined: November 4th, 2016, 1:17 am
Been thanked: 2628 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357478

Postby Gengulphus » November 17th, 2020, 8:24 pm

SalvorHardin wrote:There's also the "Doris factor". Doris, who was often mentioned in HYP articles, ...

Really? I am aware of precisely one such TMF article, namely https://web.archive.org/web/20070104152 ... doris.aspx and I would be interested if anyone can point me to any others!

Or do you perhaps mean "often mentioned in TMF posts". On that, I would agree that many of them talked about someone named Doris, but typically she was someone who was struggling to make ends meet and was therefore badly affected by dividend cuts - which makes her very clearly a different person to the Doris in the article, who "had plenty of the folding stuff" and "was pretty rich, so much so that she never really knew how much she had". I.e. most of the posts were naming someone called Doris, but not referring to the person described in the article.

Gengulphus

Lootman
The full Lemon
Posts: 18674
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6559 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357483

Postby Lootman » November 17th, 2020, 8:35 pm

Gengulphus wrote:
SalvorHardin wrote:There's also the "Doris factor". Doris, who was often mentioned in HYP articles, ...

Really? I am aware of precisely one such TMF article, namely https://web.archive.org/web/20070104152 ... doris.aspx and I would be interested if anyone can point me to any others!

Or do you perhaps mean "often mentioned in TMF posts". On that, I would agree that many of them talked about someone named Doris, but typically she was someone who was struggling to make ends meet and was therefore badly affected by dividend cuts - which makes her very clearly a different person to the Doris in the article, who "had plenty of the folding stuff" and "was pretty rich, so much so that she never really knew how much she had". I.e. most of the posts were naming someone called Doris, but not referring to the person described in the article.

I feel sure those were the two Dorises.

But the one with so much money she couldn't count it isn't really the interesting one. She could have adopted almost any investment strategy and it would have worked in the sense that she would never have run out of money. Sounds like in fact she might have not even needed to invest it, and therefore risk it, at all. So we can't learn a lot from that Doris.

The more interesting Doris is the one who is considering retirement and/or planning for her future financial security, but has limited funds. She has to decide between HYP and a few alternatives like funds, bonds, annuities etc. If she makes the wrong choice it could be a disaster. And then the question arises, could she cope with a 47% drop in income from one year to the next? Should the bulk of her income depend on just 5 or 6 shares?

The people I worry about are those who barely have enough to retire, but they think they can get away with it merely by boosting the yield of the investments they buy. For folks like you, me and Salvor, with a few million in the bank, it hardly matters what we do except for the fun of it.

MrFoolish
Lemon Quarter
Posts: 2284
Joined: March 22nd, 2020, 7:27 pm
Has thanked: 553 times
Been thanked: 1115 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357487

Postby MrFoolish » November 17th, 2020, 8:43 pm

Gengulphus wrote:
SalvorHardin wrote:There's also the "Doris factor". Doris, who was often mentioned in HYP articles, ...

Really? I am aware of precisely one such TMF article, namely https://web.archive.org/web/20070104152 ... doris.aspx and I would be interested if anyone can point me to any others!

Or do you perhaps mean "often mentioned in TMF posts". On that, I would agree that many of them talked about someone named Doris, but typically she was someone who was struggling to make ends meet and was therefore badly affected by dividend cuts - which makes her very clearly a different person to the Doris in the article, who "had plenty of the folding stuff" and "was pretty rich, so much so that she never really knew how much she had". I.e. most of the posts were naming someone called Doris, but not referring to the person described in the article.

Gengulphus


Whereas the real Doris, following some questionable advice from her accountant, kept doubling down on Aviva shares....

TUK020
Lemon Quarter
Posts: 2039
Joined: November 5th, 2016, 7:41 am
Has thanked: 762 times
Been thanked: 1175 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357489

Postby TUK020 » November 17th, 2020, 8:47 pm

SalvorHardin wrote:Following the rules, even when they were far too rigid and ignored obvious factors, was what counted. Not questioning them.


What gets me is that people seem to be unlearning a lot of the great work and contributions that have gone into TMF & TLF.

As an annuity replacement strategy, a LTBH portfolio of high yielders, equally weighted by capital has a lot going for it. The "at least 15 companies", "diversified by sector", and "equal weighting" are fundamentally risk reduction rules.

Having a >40% loss of income once a decade doesn't lead to a relaxed retirement.

TJH has explained his top-slicing/top up rules patiently, and the top up part of this forms the basis for the excellent HYPTUSS. He has backed this up and continues to do so with extensive records.
Yes, "selling you winners" will have an opportunity cost if they keep on winning. Something you will only know in hindsight. People comment on the dependence on BAT. May I remind everyone that this peaked at over £50, roughly double where it is at the moment. Bear a though on how a top slicing or two could have captured that gain and redeployed it.

The second thing that we need to remember is that an income stream that loses >40% unpredictably, is not very comfortable retirement plan
I have seen comments that HYP1 is better than something like CTY I.T. because over the period it wins in gross income and capital growth.
Luni (remember him?) talked extensively about 'de-risking', holding up to 2 years worth of income in a reserve buffer.
A more appropriate comparison would be between unit of capital invested in CTY, and a unit of capital split between a portfolio of shares, and an income reserve buffer.

I am quite happy to engage in a discussion about rebalancing for risk reduction - keeping trading costs down, but still capturing gains.
I would be even happy to talk about income buffer strategies (though I think Luni has said it all).
What I don't understand is the desire to keep returning to "the rules", and refusal to acknowledge that there may be more than one way to skin a cat.

I do perceive that the HYP-P guidelines have been strengthened largely as a response to a core group of folk who seemed determined to pick a fight. But its loss of usefulness and relevance is sad.

MrFoolish
Lemon Quarter
Posts: 2284
Joined: March 22nd, 2020, 7:27 pm
Has thanked: 553 times
Been thanked: 1115 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357493

Postby MrFoolish » November 17th, 2020, 9:06 pm

TUK020 wrote:TJH has explained his top-slicing/top up rules patiently, and the top up part of this forms the basis for the excellent HYPTUSS.


I keep reading about this HYPTUSS. What is it, where is it? Thanks.

kiloran
Lemon Quarter
Posts: 4092
Joined: November 4th, 2016, 9:24 am
Has thanked: 3233 times
Been thanked: 2827 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357494

Postby kiloran » November 17th, 2020, 9:08 pm

MrFoolish wrote:
TUK020 wrote:TJH has explained his top-slicing/top up rules patiently, and the top up part of this forms the basis for the excellent HYPTUSS.


I keep reading about this HYPTUSS. What is it, where is it? Thanks.


Here it is: http://lemonfoolfinancialsoftware.weebl ... op-up.html

--kiloran

Alaric
Lemon Half
Posts: 6031
Joined: November 5th, 2016, 9:05 am
Has thanked: 20 times
Been thanked: 1398 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357495

Postby Alaric » November 17th, 2020, 9:17 pm

TUK020 wrote:The second thing that we need to remember is that an income stream that loses >40% unpredictably, is not very comfortable retirement plan


One might think that a universally accepted point. That it is not can explain some of the rancour that can accompany discussions.

funduffer
Lemon Quarter
Posts: 1327
Joined: November 4th, 2016, 12:11 pm
Has thanked: 122 times
Been thanked: 831 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357502

Postby funduffer » November 17th, 2020, 10:18 pm

I think most of this discussion misses the point.

HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.

Appropriate comparisons for HYP are other retirement products not other investment strategies (unless they are also aimed at this objective).

Annuities or insurance- based retirement products seem the most appropriate comparators.

As HYP seems to be popular for early retirees, who are not old enough to take their state pension, HYP offers a retirement alternative that is likely to be far superior to annuities, and probably other types of commercial retirement packages.

This is why I have a HYP, although I also have a portfolio of high income IT’s.

I think this was pyad’s original target market for this type of investment strategy, but I am happy to corrected if I have got this wrong.

FD

MrFoolish
Lemon Quarter
Posts: 2284
Joined: March 22nd, 2020, 7:27 pm
Has thanked: 553 times
Been thanked: 1115 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357508

Postby MrFoolish » November 17th, 2020, 10:46 pm

funduffer wrote:I think most of this discussion misses the point.

HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.
FD


I think this is the problem though. If a big chunk of your retirement income is coming from a handful of shares, then it might be rather natural to end up fretting about it.

tjh290633
Lemon Half
Posts: 8208
Joined: November 4th, 2016, 11:20 am
Has thanked: 913 times
Been thanked: 4096 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357525

Postby tjh290633 » November 17th, 2020, 11:33 pm

TUK020 wrote:Having a >40% loss of income once a decade doesn't lead to a relaxed retirement.

TJH has explained his top-slicing/top up rules patiently, and the top up part of this forms the basis for the excellent HYPTUSS. He has backed this up and continues to do so with extensive records.

I might add that a big fall in income can call for a lot of work on the portfolio to recover the situation, as happened after the collapse in income in 2009-10. The present situation does not offer a parallel to that event, which was caused by different factors, and there could well be a different style of recovery of dividends this time. Only time will tell.

TJH

Alaric
Lemon Half
Posts: 6031
Joined: November 5th, 2016, 9:05 am
Has thanked: 20 times
Been thanked: 1398 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357528

Postby Alaric » November 17th, 2020, 11:40 pm

funduffer wrote:HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.


Given those objectives, why doesn't a parcel of ITs achieve these with less income volatility?

Much of the chatter on the HYP-P board is those who are using the dividend income for reinvestment rather than living expenses. Growth investors in effect who can be relaxed about volatility of income receipts and illogically about capital values as well.in the sense that they are seemingly unconcerned to test whether the income performance is at the expense of capital.

Bagger46

Re: HYP1 is 20 - thread discussing income and capital diversification

#357561

Postby Bagger46 » November 18th, 2020, 8:25 am

Alaric wrote:
funduffer wrote:HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.


Given those objectives, why doesn't a parcel of ITs achieve these with less income volatility?

Much of the chatter on the HYP-P board is those who are using the dividend income for reinvestment rather than living expenses. Growth investors in effect who can be relaxed about volatility of income receipts and illogically about capital values as well.in the sense that they are seemingly unconcerned to test whether the income performance is at the expense of capital.


You are essentially correct. In my personal experience, all the retired people I know who require portfolio income, and it is quite a few real people, have chosen the IT route, plus the odd pref in a few cases for the the bulk of income core of their portfolio, simply because of the large volatility they know can happen in holding only HY individual holdings portfolios, as we see here. I might add that the people I am referring to are (mostly) highly capable of understanding all aspects of investing, having suitable numeracy and professional/business/finance backgrounds. Quite a few, who generally tend to be better off so they don’t need a massive portfolio yield, have a growth component which is ‘ occasionally milked’ to create income for ‘special’expenses. The best HY practitioner on these boards, imho, in fact systematically milks his growth too to enhance his income, a variation on that theme.

One other aspect of HYP which is a large weakness for pot builders is as follows: when those massive dips in income arrive, they of course coincide with terrible markets, but those terrible markets are the sweet spot for topping up, so they have reduced divi flow exactly at the wrong time. I remain vehemently against HYP, or any form of HY dominated portfolio approach for youngsters. I see a great danger of such youngsters being lured in aping a ‘lucky rubbish demo’ portfolio and what I see as a false guru.

Bagger

PS We will never need portfolio income ourselves.But I have access to 36 real portfolios online. Some are very recent, but the bulk are very long term portfolios. The comment above is what I glean from that info base, plus a few other friends and acquaintances. And by the way of the twenty odd portfolios which are old enough, only three have underperformed HYP1, and not by much apart from one. Our three portfolios have better XIRRs than HYP1, including our most conservative(my wife’s ISA), which mostly contains ITs. But according to one poster at least I am just a moron who does not understand HYP!

BellaHubby
Lemon Pip
Posts: 91
Joined: January 21st, 2017, 11:57 am
Has thanked: 9 times
Been thanked: 62 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357568

Postby BellaHubby » November 18th, 2020, 8:50 am

Alaric wrote:
funduffer wrote:HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.


Given those objectives, why doesn't a parcel of ITs achieve these with less income volatility?

Much of the chatter on the HYP-P board is those who are using the dividend income for reinvestment rather than living expenses. Growth investors in effect who can be relaxed about volatility of income receipts and illogically about capital values as well.in the sense that they are seemingly unconcerned to test whether the income performance is at the expense of capital.

A basket of ITs is a perfectly reasonable alternative to HYP. Less effort, maybe, but with downsides that you are paying someone to manage the portfolio, and they typically hold back payouts in the good years to use in the bad years. A HYPer can do exactly the same if they wish.
There are many ways to achieve an investment objective, HYP is just one of them. None is ideal or perfect.

It's interesting to note that you don't find HYPers sniping on the IT board, so why is there all this sniping on the HYP board?

Wizard
Lemon Quarter
Posts: 2829
Joined: November 7th, 2016, 8:22 am
Has thanked: 68 times
Been thanked: 1029 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357569

Postby Wizard » November 18th, 2020, 8:52 am

Gengulphus wrote:
SalvorHardin wrote:There's also the "Doris factor". Doris, who was often mentioned in HYP articles, ...

Really? I am aware of precisely one such TMF article, namely https://web.archive.org/web/20070104152 ... doris.aspx and I would be interested if anyone can point me to any others!

I do not think anyone has pointed out what I think, are the key sentences in the original Doris article as far as this thread is concerned, which I will highlight in the extract below...

Stephen Bland wrote:...Most of her wealth was invested in shares held in a portfolio she had inherited a very long time ago... The only changes to the portfolio over all those years were consequently those mandatory impositions resulting from corporate activity...

The share portfolio and its dividend income had grown tremendously over the lengthy period she had owned it. Over some forty years, at £7m it was around 65 times its value when she inherited it at a then value of £108,000 back in the thirties...

The shares were generally a selection of the blue chips of their day. I don't know what strategy if any had been employed to select them, I couldn't tell how it had been done because it was too long ago but at a guess it was purely a selection of blue chips because, well, they were blue chips. They weren't concentrated in any particular sector but were well diversified.

I used to tell Doris that she was one of the best investors amongst all my clients, precisely because she knew nothing about it and even more importantly, didn't want to know. On a risk adjusted basis, because her portfolio of blue chips was low risk compared to the way many others I knew invested, she possibly was the best.

My bold.

The first sentence tells us that Doris' portfolio had not behaved like HYP1 has, it remained diversified. If this was not the case surely the sentence would have referred to it being well diversified at the time of selection (from the article I think it is clear Stephen Bland would have had no insight into the level of diversification at purchase, he only knew the portfolio from the time he started to do Doris' tax returns many years later). Indeed, if that had changed surely it would have been worth mentioning in the article that that diversification had been watered down over the forty years Doris owned the portfolio. So I think it is pretty clear that the article was telling this portfolio retained its diversification.

I believe my conclusion above is confirmed in the second highlighted sentence. If Doris' portfolio showed the imbalance that HYP1 does I can not see how it could be described as relatively low risk.

So whether the story was fact, fiction, or a bit of both, what we are told is that Doris had a portfolio that was initially well diversified and remained so after over forty years. In that situation I can see why nobody would worry about 'tinkering' with the portfolio. But that is not how HYP1 looks after half that time. My guess is that PYAD did not expect HYP1 would ever look anywhere near as unbalanced as it does now when it was first selected.
Last edited by Wizard on November 18th, 2020, 8:58 am, edited 1 time in total.

Wizard
Lemon Quarter
Posts: 2829
Joined: November 7th, 2016, 8:22 am
Has thanked: 68 times
Been thanked: 1029 times

Re: HYP1 is 20 - thread discussing income and capital diversification

#357573

Postby Wizard » November 18th, 2020, 8:55 am

BellaHubby wrote:
Alaric wrote:
funduffer wrote:HYP was intended as a retirement income option for someone with a lump sum investment, who needed to boost income, and who was an unsophisticated LTBH investor, who wanted little or no trading - just to spend, live and not fret about their portfolio.


Given those objectives, why doesn't a parcel of ITs achieve these with less income volatility?

Much of the chatter on the HYP-P board is those who are using the dividend income for reinvestment rather than living expenses. Growth investors in effect who can be relaxed about volatility of income receipts and illogically about capital values as well.in the sense that they are seemingly unconcerned to test whether the income performance is at the expense of capital.

A basket of ITs is a perfectly reasonable alternative to HYP. Less effort, maybe, but with downsides that you are paying someone to manage the portfolio, and they typically hold back payouts in the good years to use in the bad years. A HYPer can do exactly the same if they wish.
There are many ways to achieve an investment objective, HYP is just one of them. None is ideal or perfect.

It's interesting to note that you don't find HYPers sniping on the IT board, so why is there all this sniping on the HYP board?

My bold.

I get your general point. But in the case of this thread it is not on the HYP Board. I also think (with a couple of exceptions) the discussion has been a reasonable one about the merits of HYP1 as an example of a fully non-tinkering example of the HYP approach. Surely a perfectly reasonable discussion for a board intended for the discussion of different high yield strategies?


Return to “High Yield Shares & Strategies - General”

Who is online

Users browsing this forum: No registered users and 4 guests