Overall portfolio yield compared to a collective IT, such as CTY

[Dod101]

Well, I think one needs some sort of benchmark. Even if it's as unambitious as the Top 100.
Unless HYP is a complete hobby and neither the capital nor the income really matter.

As said, the OP's HYP needs a prune. Cut out the dead wood. Then a further period of vegetation can ensue.

Not quite vegetation I would have thought, as much as a period of untrammelled growth. A period of vegetation usually means standing still but that is not what I would want anyway.

A most peculiar meaning, in fact: what vegetation tends to do when left to itself is untrammelled growth, not standing still - ask anyone who has had to tackle a neglected garden! ;-)

Gengulphus

Chambers 20th Century dictionary (so last century)

to vegetate;- to live an inactive, almost purely physical or dull, life.

I assume that the OP was using the word as a verb; otherwise it is he/she that is unclear.


Dod

[TUK020]

Chambers 20th Century dictionary (so last century)

to vegetate;- to live an inactive, almost purely physical or dull, life.

I assume that the OP was using the word as a verb; otherwise it is he/she that is unclear.


Dod

Opposite of "cogitate"?

[Gengulphus]

But I believe that is not how moorfield uses CTY as a benchmark. Rather moorfield suggests that any selection for an HYP should, at the time of purchase, have a yield greater than that for The City of London Investment Trust plc (CTY). Either that or else an HYP portfolio should have a yield greater than that offered by CTY. As I stated previously, the HYP strategy does in fact suggest one should select the highest sustainable yield available, subject to diversification of course. The yield of CTY, any Investment Trust or other asset for that matter, is totally irrelevant to such a decision.

Forgetting moorfield's raher specific focus on CTY, I believe he makes a more general point sometimes, which has legs: why invest in a HYP share (a top-up, for example) which has a yield lower than one could receive from various ITs? That is a dicussion I often have with myself
A single share at the same yield as a pooled investment would seem a riskier business. I know that begs several questions, but he has a thought provoking point, unless one is particularly wedded to HYP as an article of faith.

That appearance of a single share being a riskier business than a pooled investment can be deceptive: adding a well-chosen single share to an existing HYP can reduce its risk by more than adding a well-chosen IT would. Why? Because when you add a single share, all your money is going into improving the HYP's diversification, but when you add an IT (other than the sort of specialist ITs that can be discussed on this board), a part of it is generally going into just adding more of what the HYP has already got. How big a part depends on how great the overlap is between the HYP's holdings and the IT's underlying holdings.

Note that I'm not saying adding a single share will reduce its risk by more than adding an IT would, just that it can do so. What adding an IT to a HYP definitely does do is increase the complexity of getting a good picture of the HYP's diversification (one needs to track the IT's underlying holdings and add a suitable proportion of the amount invested in each of them to the amount the HYP has directly invested in that holding), and it also decreases the HYPer's control over that diversification (as some decisions affecting it are made by the IT manager rather than the HYPer). At least for some HYPers, the simplicity of knowing what they own and/or having a high degree of control over it are important features of a HYP...

And that's about as far as I'm willing to pursue your thoughts on this board - they really would be much better placed on High Yield Shares & Strategies, where they can be discussed with much less danger of the discussion being abruptly terminated for not being about the practical aspects of running HYPs...

Gengulphus

[Gengulphus]

Not quite vegetation I would have thought, as much as a period of untrammelled growth. A period of vegetation usually means standing still but that is not what I would want anyway.

A most peculiar meaning, in fact: what vegetation tends to do when left to itself is untrammelled growth, not standing still - ask anyone who has had to tackle a neglected garden! ;-)

Chambers 20th Century dictionary (so last century)

to vegetate;- to live an inactive, almost purely physical or dull, life.

I assume that the OP was using the word as a verb; otherwise it is he/she that is unclear.

The word used was the noun "vegetation", not the verb "vegetate". But yes, I know that when it's used to describe how someone is living their life rather than to describe plant life, the noun "vegetation" generally refers to an inactive, almost purely physical or dull, life. But chasing its origins, https://www.dictionary.com/browse/vegetation says:

Origin of vegetation
1555–65; <Medieval Latin vegetātiōn- (stem of vegetātiō), equivalent to vegetāt- (see vegetate) + -iōn--ion

and following the "see vegetate" link, https://www.dictionary.com/browse/vegetate says:

Origin of vegetate
1595–1605; <Latin vegetātus (past participle of vegetāre to quicken, enliven), equivalent to veget(us) lively (originally past participle of vegēre to give vigor) + -ātus-ate

It is rather odd that words whose origins are in Latin words meaning "quicken", "enliven" and "lively" has come to describe living an existence that is pretty much opposite to those words!

That oddity presumably arises from the fact that when vegetation (in the plant life sense) is watched over the short term, it apparently does very little - but when watched over the long term, it can and often does grow a great deal. A most appropriate analogy to a HYP, in fact - even to the extent that without pruning, a few plants will probably grow to dominate the rest!

Gengulphus

[88V8]

Every day I compare my HYPs capital performance........

Ian
You disgraceful person
This is like Dorisian, but without the Doris

Vegetate, dear chap, it's the HYP way.

V8

[moorfield]

With a strategy like HYP, where one selects the highest yield that one considers sustainable, subject of course to diversification, why does one need a benchmark? Total nonsense in my opinion.

I would have thought the answer was obvious - one can form an objective view on whether one is acting in the best interests of one's hard-earned and hard-saved capital. Unless one is particularly wedded to HYP as an article of faith, as Arb has aptly put it.

I didn't have time to reply to all the requotes earlier and am not planning to do so, asked my PA to fill in. Happy to continue the discussion elsewhere.

[IanTHughes]

With a strategy like HYP, where one selects the highest yield that one considers sustainable, subject of course to diversification, why does one need a benchmark? Total nonsense in my opinion.

I would have thought the answer was obvious - one can form an objective view on whether one is acting in the best interests of one's hard-earned and hard-saved capital. Unless one is particularly wedded to HYP as an article of faith, as Arb has aptly put it.

Yes, the answer to the question is obvious, to anyone that understands HYP of course. If one is applying the HYP strategy, there is no need for a benchmark! I am so pleased that you agree

The statements in this discussion that indicate someone who is "wedded" to anything, is the so predictable anti-HYP strawman arguments made by yourself. Why can you not accept that HYP works for some people? Further, my research tells me that HYP does not damage wealth, whether measured by income received or capital retained, when compared with other possible investing methods, and yet you continue to disparage the strategy. Of course as always, you appear completely unable to offer any evidence whatsoever to back up your view. Now to me that does smack of a "religious" intolerance akin to the Spanish Inquisition!

You are the one with a religious fervour, not me! Nor any other HYPer for that matter!

Of course, if you do have evidence that my above assertions are incorrect, all you have to do is provide it! As always with these requests, I will not hold my breath!


Ian

[idpickering]

Every day I compare my HYPs capital performance........

Ian
You disgraceful person
This is like Dorisian, but without the Doris

Vegetate, dear chap, it's the HYP way.

V8

I reserve the right to manage and measure my HYP however I see fit. Each to their own. I note the smiley, but being called disgraceful is not appreciated by me at least.

Ian.

[moorfield]

Yes, the answer to the question is obvious, to anyone that understands HYP of course. If one is applying the HYP strategy, there is no need for a benchmark! I am so pleased that you agree

The statements in this discussion that indicate someone who is "wedded" to anything, is the so predictable anti-HYP strawman arguments made by yourself. Why can you not accept that HYP works for some people? Further, my research tells me that HYP does not damage wealth, whether measured by income received or capital retained, when compared with other possible investing methods, and yet you continue to disparage the strategy. Of course as always, you appear completely unable to offer any evidence whatsoever to back up your view. Now to me that does smack of a "religious" intolerance akin to the Spanish Inquisition!

You are the one with a religious fervour, not me! Nor any other HYPer for that matter!

Of course, if you do have evidence that my above assertions are incorrect, all you have to do is provide it! As always with these requests, I will not hold my breath!

You misunderstand me Ian. I am not anti-HYP and do accept that HYP works for some people. If I appear to have any religious fervor it is that I am anti-LYP and to a lesser extent anti-tinkering. I am interested in exploring the boundary where a HYP becomes a LYP and how it can be recognized, which I think is a reasonable topic for this board. One must exist, take this thought to an extreme: no HYPster here would buy or hold a portfolio of shares yielding nothing (we can evidence that with a poll perhaps). So I argue there comes a point at which HYPsters must tinker to increase their portfolio yield. Where is the event horizon of the LYP black hole, and how can one recognize and avoid it? That's the question I am exploring with my comparison.

[Itsallaguess]

So I argue there comes a point at which HYPsters must tinker to increase their portfolio yield.

Where is the event horizon of the LYP black hole, and how can one recognize and avoid it?

That's the question I am exploring with my [CTY] comparison.

I was very reluctant to get involved with this side-discussion on the original HYP-Practical portfolio-review thread, but now Chris has helpfully split this section of the discussion off onto the High Yield Shares & Strategies board, then I'm happy to reply to the above without risking the original thread being spoiled...

Before doing so, I think it's worth reflecting on the original HYP portfolio being discussed, and specifically regarding the first post on the review which clearly stated this -

Running Yield = 4.02%

https://www.lemonfool.co.uk/viewtopic.php?f=15&t=26799

Given that this was the running yield from a HYP containing almost 50 FTSE-based holdings, I think it then became important to remember what the over-riding aim of the portfolio was -

Over 17 years I can see the approach is 'good enough' for me to deliver a supplementary income stream with minimal effort on my part. Staying away from too many buying and selling decisions is part of the attraction.

Whilst it's clearly delivering on that aim, and noting here that the OP also now recognises the benefit of at least some sort of HYP portfolio-management pruning tasks every so often, I think it's still worth asking the question if the particular method of producing that relatively low yield could be improved...

To answer that question, I suppose we'd have to make sure that any proposed improvement would still deliver on those primary aims -

1. Good enough to deliver a supplementary income with minimal effort.
2. Stay away from buying and selling decisions

The Investors Chronicle article linked below reviews two income-oriented Investment Trust portfolios over the past 12 months.

One IT portfolio yielded around 4.6%, with the other yielding around 5%.

The first suffered a capital loss of around 14.7%, with the second losing around 8.9%.

Both income-IT portfolios are broadly diversified in both global reach and sectors.

Note - when using the URL below, the first search-result should be selected, headed 'Our investment trust income portfolios 2019: 12 months on' (dated 20th Nov 2020) -

https://www.google.com/search?source=hp&q=our-investment-trust-income-portfolios-2019-12-months-on

I wouldn't be in a position to recommend either of the two income-IT portfolios mentioned in the above article, but I post the link here to hopefully show two things -

1. It's possible to deliver an improved yield over the OP's 4.02% HYP yield with a collection of globally and sectorally diverse income-IT's (4.6% and 5% with the two IT portfolios linked above)

2. It's possible to deliver on both of the primary aims of the OP ('good enough to deliver a supplementary income with minimal effort, and also, stay away from buying and selling decisions') with a collection of globally and sectorally diverse income-IT's

I would even go so far as to argue that the original HYP portfolio, with nearly 50 underlying holdings, would be likely to need more hands-on lifetime management than a broadly-selected range of global income-IT's, but the primary reason for me posting the above on this thread would be to simply ask -

Is a 4% HYP yield worth the narrow single-market risk of holding nearly 50 individual shares from that FTSE market?

If the overall yield was 6%, or even 5%, and depending on the long and nearer-term capital performance of the overall HYP portfolio (which might be critical, given the FTSE performance over the past 12 months, mind...), then I might consider it worth it, but with such a large number of individual holdings delivering such a relatively low overall yield, I think I would definitely begin to ask myself to what advantage that single-market risk is being taken on for...

But even with the above said, and getting back to the quote at the top of the post ('So I argue there comes a point at which HYPsters must tinker to increase their portfolio yield.'), I think that almost gets to the heart of the issue with HYP for me, which is that where a HYPer is 'by design' market-restricted, then even if they do end up deciding that they want to tinker and aim for a higher yield, they do so with one hand tied behind their backs in terms of just where they might seek out those higher-yielding entities...

Hopefully then, the above Investors Chronicle article might at least provide some food for thought for anyone who might prefer to take a wider net, and look at the possibility of broader income-producing entities being available to both deliver on that higher-yield that they might seek out, whilst perhaps gaining additional diversification in terms of global or sectoral reach, and at the same time, still importantly delivering on the 'suplementary income, hands-off' approach required from the holder of the original HYP...

Cheers,

Itsallaguess

[88V8]

Is a 4% HYP yield worth the narrow single-market risk of holding nearly 50 individual shares from that FTSE market?

Surely not. Although the risk is moderated by the worldwide income streams of many UK-listed companies.
Nevertheless for 4%, worth neither the risk nor the botheration imho, although the OP seems to have avoided much of the botheration by just letting it run. A very Dorisian approach which some of us never quite manage. Speaking for myself of course.

If I were the OP, I would regard it as an experiment that has run its course.
At least it will now benefit from significant pruning, and if one wishes to continue the hands-off approach, then it is hard to see why one would not embrace a more IT-heavy portfolio.

V8

[Dod101]

Speaking for myself, my income, I have not at this point calculated the yield, will be well down this year, much further than I had expected actually.

Ironically I might be better with City of London???

Still it looks as if the capital has recovered pretty well from the lows of March. I will be able to comment further in a week or ten days.

Dod

[moorfield]

Ironically I might be better with City of London???

Now you are starting to ask yourself the right questions. More will come.

[Dod101]

Ironically I might be better with City of London???

Now you are starting to ask yourself the right questions. More will come.

Very droll. I will do an analysis at year end but as I now have only two more dividends to come it is fairly clear where I am likely to end the year.

Obviously I have been hammered like everyone else who holds them by HSBC, but Shell came as a shock and Imperial Brands, while not a surprise, was quite a big hit. I had small losses from M J Gleeson and I think maybe another small holding.

Dod

[kempiejon]

The natural question to ask myself (or at least one of the first) should be "if I can't do better than a managed (fund) investment trust, why bother with something else?). Another question might be "when does a portfolio of stocks become so "fund like" that you may as well just buy the fund (or investment trust)?" Surely, a portfolio of close to 50 stocks is absolutely in "fund like" territory?

RVF

If one (thinks they) can do better than a managed fund why would it matter if their efforts look like a fund? Even if they have become fund-like why would anyone want to pay fees to have a fund manager do what they're already doing for a lower cost. Still I also recon an index tracker usually beats a fund and I'm having a chat with myself as to whether I can beat a tracker.

[Itsallaguess]

The natural question to ask myself (or at least one of the first) should be "if I can't do better than a managed (fund) investment trust, why bother with something else?). Another question might be "when does a portfolio of stocks become so "fund like" that you may as well just buy the fund (or investment trust)?" Surely, a portfolio of close to 50 stocks is absolutely in "fund like" territory?

If one (thinks they) can do better than a managed fund why would it matter if their efforts look like a fund?

Even if they have become fund-like why would anyone want to pay fees to have a fund manager do what they're already doing for a lower cost.

But the 'do' bit is important, isn't it?

And when that 'do' task is to hopefully provide an income from the overall portfolio, and when that 'do' task is delivering a portfolio yield of just 4.02%, then it's surely valid to ask if 'what they are already doing' is even 'as good', never mind 'better', when IT-based, more broadly diversified alternatives are available, that potentially deliver a better overall yield at the same time, whilst maintaining the important 'hands-off' remit of the original approach...

For me, the number of holdings wasn't nearly as relevant as the 4.02% overall yield, which was the crucial element here when beginning to question if it's worth the candle, but when we roll up both of those aspects, then it would be difficult for me personally to agree that it was....

Cheers,

Itsallaguess

[Arborbridge]

But, if I were to discover that a particular income collective, or more likely a pool of income collectives, could surpass my own efforts, I would most certainly ditch HYP and switch to that other method. So far, I have not found any such collective and certainly not a pool of them! And, believe you me, I am looking!


Ian

My feeling is that I have trouble trying to outrun a good manager - or basket of managers. (collective noun?) You can see that from my comparisons that I publish from time to time.

But also, I believe there's nothing like having skin in the game to maintain one's interest in such comparisons. It forces you to measure plot and think in a way that just looking at a chart on a website wouldn't do. There's nothing like your own real life experience to form an opinion, and it needs to be in parallel with one's HYP and for a considerable period of time.

It would be interesting to know which instruments you looked at for comparisons to your HYP, whether you ran anything in parallel, for how long, and what the results were which brought you to the opinion you formed.

Arb.

[Gengulphus]

The natural question to ask myself (or at least one of the first) should be "if I can't do better than a managed (fund) investment trust, why bother with something else?). Another question might be "when does a portfolio of stocks become so "fund like" that you may as well just buy the fund (or investment trust)?" Surely, a portfolio of close to 50 stocks is absolutely in "fund like" territory?

If one (thinks they) can do better than a managed fund why would it matter if their efforts look like a fund? Even if they have become fund-like why would anyone want to pay fees to have a fund manager do what they're already doing for a lower cost. Still I also recon an index tracker usually beats a fund and I'm having a chat with myself as to whether I can beat a tracker.

All valid questions and it can only be a good thing if we ask ourselves such things. We will all have our own answers and as long as we're content, then it's absolutely fine. It's nobody's business at the end of the day but stimulating discussion is always good.

Valid questions, yes, but it can be a bad thing to ask ourselves such questions. Specifically, it's a bad thing if we've already asked ourselves such questions and answered them to our own satisfaction, and we ask ourselves the same questions again too soon afterwards, because we'll then just be wasting time we have better uses for!

Problems arise when others decide we've arrived at the wrong answers and try to bring those questions to our attention again and again, on a board which is supposed to be free of such questions. Basically, leave us to decide for ourselves when we want to re-examine the question of whether a HYP strategy is suitable for us - we can (and should) come over to this board when we do want to do that.

Gengulphus

[moorfield]

The natural question to ask myself (or at least one of the first) should be "if I can't do better than a managed (fund) investment trust, why bother with something else?).

Quite so RVF, and this is the question I feel can form the basis for some very practical advice to HYPsters: aim to buy or consistently hold a portfolio yielding more than an investment trust which picks shares from the same indexes. Anything less is the entry criterion for mandatory tinkering and ratcheting up of income. HYPsters are free to ignore that of course, but note that a well known poster (TJH) already does this regularly, albeit by a different method which does not consider portfolio yield rather the relative weights of holdings within.

[tjh290633]

The natural question to ask myself (or at least one of the first) should be "if I can't do better than a managed (fund) investment trust, why bother with something else?).

Quite so RVF, and this is the question I feel can form the basis for some very practical advice to HYPsters: aim to buy or consistently hold a portfolio yielding more than an investment trust which picks shares from the same indexes. Anything less is the entry criterion for mandatory tinkering and ratcheting up of income. HYPsters are free to ignore that of course, but note that a well known poster (TJH) already does this regularly, albeit by a different method which does not consider portfolio yield rather the relative weights of holdings within.

The method considers the relative weights and yields of the individual holdings. In normal circumstances, no holding with a yield below that of the median holding yield would be considered for topping up. Shares which exceed the maximum allowed weight for a holding, and are consequently trimmed, almost invariably have a yield below that of the median holding yield.

The portfolio yield may be above or below that of the median holding because of holding weight distribution. Currently the position is:

Median 3.62%
Mean 3.58%

Overall 3.69% (Portfolio yield)

The Portfolio yield is reduced because of the number of holdings either paying no dividend or a reduced dividend. At the start of the year portfolio yield was 5.08%.

TJH