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Market timing heresy

General discussions about equity high-yield income strategies
TUK020
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Market timing heresy

#413564

Postby TUK020 » May 20th, 2021, 2:29 pm

Copied from another post by IAAG on IMB:

City of London Investment Trust Dividend Yield History -

https://www.dividenddata.co.uk/dividend ... y?epic=CTY

Looking at this makes me wonder if there is a worthwhile asset allocation re-balancing strategy in here:
Topslice CTY when yield<3.75%
Add CTY when yield >5%
It might require a big cash float to make a difference

Any views?

Itsallaguess
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Re: Market timing heresy

#413582

Postby Itsallaguess » May 20th, 2021, 3:06 pm

TUK020 wrote:
City of London Investment Trust Dividend Yield History -

https://www.dividenddata.co.uk/dividend-yield.py?epic=CTY

Looking at this makes me wonder if there is a worthwhile asset allocation re-balancing strategy in here:

Topslice CTY when yield<3.75%

Add CTY when yield >5%

It might require a big cash float to make a difference

Any views?


Well I've certainly utilised a top-slice and/or full-sale strategy (as part of my overall income-strategy) where what 'used to be' a high-yielding investment drops into fairly prolonged 'low-yield territory', but for me that's almost been exclusively where such holdings have carried out that high-yield to low-yield 'conversion' because of large and sustained rises in share-prices....

There's also, of course, the chance that such a high-yield to low-yield 'conversion' might be due less to share-price-action than perhaps due to reduced-dividend-level-action, and so in those circumstances I'm not sure it would mean that a single 'asset allocation re-balancing strategy' *just* using 'yield' as a guide would be the best method of defining it...

When I've been lucky enough to carry out this type of top-slice or full-sale process in the past, it's usually when income-holding yields drop to around the 2% mark that I start to look for alternative homes, and it's certainly been a worthwhile approach over the years to keep an eye out for the market offering up such 'opportunities'....

Cheers,

Itsallaguess

TUK020
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Re: Market timing heresy

#413596

Postby TUK020 » May 20th, 2021, 3:47 pm

Itsallaguess wrote:There's also, of course, the chance that such a high-yield to low-yield 'conversion' might be due less to share-price-action than perhaps due to reduced-dividend-level-action, and so in those circumstances I'm not sure it would mean that a single 'asset allocation re-balancing strategy' *just* using 'yield' as a guide would be the best method of defining it...

Cheers,

Itsallaguess


Good qualification IAAG.
I was making an assumption that CTY is a pretty solid steady trundler on the yield front* which has been subject to a rather good couple of stress tests (GFC, COVID) in the last couple of decades which it has passed with flying colours.

* I do recall saying the same thing about Shell a while back.......

tuk020

tjh290633
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Re: Market timing heresy

#413604

Postby tjh290633 » May 20th, 2021, 4:07 pm

TUK020 wrote:Copied from another post by IAAG on IMB:

City of London Investment Trust Dividend Yield History -

https://www.dividenddata.co.uk/dividend ... y?epic=CTY

Looking at this makes me wonder if there is a worthwhile asset allocation re-balancing strategy in here:
Topslice CTY when yield<3.75%
Add CTY when yield >5%
It might require a big cash float to make a difference

Any views?

Unfortunately that takes no account of market movements. Everything is relative and that is why I use my median holding value as the yardstick to determine whether a share is overweight or underweight. If you just use yield, you may be missing something more obvious. You could perhaps say sell if the yield is 30% less than that of the FTSE350HY (HIX) and buy if the yield is 50% more than the yield on the HIX.

That could apply to any share or IT.

TJH

TUK020
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Re: Market timing heresy

#413615

Postby TUK020 » May 20th, 2021, 4:41 pm

tjh290633 wrote:
TUK020 wrote:Copied from another post by IAAG on IMB:

City of London Investment Trust Dividend Yield History -

https://www.dividenddata.co.uk/dividend ... y?epic=CTY

Looking at this makes me wonder if there is a worthwhile asset allocation re-balancing strategy in here:
Topslice CTY when yield<3.75%
Add CTY when yield >5%
It might require a big cash float to make a difference

Any views?

Unfortunately that takes no account of market movements. Everything is relative and that is why I use my median holding value as the yardstick to determine whether a share is overweight or underweight. If you just use yield, you may be missing something more obvious. You could perhaps say sell if the yield is 30% less than that of the FTSE350HY (HIX) and buy if the yield is 50% more than the yield on the HIX.

That could apply to any share or IT.

TJH

Actually Terry, that was exactly the point I was thinking about.

Your top slice/rebalance strategy is a superb way of accounting for overall market movement, and allocating funds within this to stay fully invested, and profit from the noise/mean reversion of individual shares.

What I am thinking about here is to take a 'market benchmark' with very reliable dividend, and use the market pricing variation to trade in and out of the market and out/in cash as a balance.

In engineer's speak, your strategy profits from differential noise (market price variation) between shares, while accounting for common mode noise (overall market movement).
What I am talking about here is trying to gain from the overall market movement.

GoSeigen
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Re: Market timing heresy

#413636

Postby GoSeigen » May 20th, 2021, 5:52 pm

TUK020 wrote:Copied from another post by IAAG on IMB:

City of London Investment Trust Dividend Yield History -

https://www.dividenddata.co.uk/dividend ... y?epic=CTY

Looking at this makes me wonder if there is a worthwhile asset allocation re-balancing strategy in here:
Topslice CTY when yield<3.75%
Add CTY when yield >5%
It might require a big cash float to make a difference

Any views?


HYP is a market timing strategy so it's hardly heresy round here! This looks similar to the HYP timing criterion so would probably perform in a similar way, i.e. fine when income is not valued or companies are under-declaring dividends, not so good in other circumstances.

GS


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