Dod101 wrote:
I am inclined to think that common sense is prevailing and that the whole hearted dedication to the original HYP concept is waning.
As someone who's got a lot of interest in income-investing, and having myself moved away from a HYP (FTSE-focussed, single-company) approach, I don't think that using the phrase 'common sense' would be an appropriate way of describing my own decision to move away from it, because I think using language like that tends to denigrate those HYPers who remain happy with their own HYP approaches, and it's clear that there are investors who
are still happy to take that approach, and perhaps implying that they lack 'common sense' whilst doing so isn't really going to help any useful debate around the subject...
We're all different, and if we might accept that *any* investment strategy is likely to have
some aspects of it that may or may not suit any particular individual investor, then I'd simply describe my own journey away from the HYP approach as one of a stark realisation that it's own shortfalls as an income-strategy just didn't
suit me personally, and if I were to list the primary ones that I
personally struggled with then they would generally be -
- Too narrowly focussed in geographical scope, in terms of being UK/FTSE-focussed, and missing out on more global emerging markets, for instance
- Too narrowly focussed in sectoral scope, in terms of the UK/FTSE market generally being dominated by 'old-school' industries, and often missing out on emerging sectors
- High volatility of income due to regularly fishing in areas of the market that often have yields that are simply 'too-high' to be regularly sustainable over the very long term
- Generally needing more attention and 'hands-on action' than the type of income-strategy that I was actually looking for, personally
I've managed to largely solve every one of the above personal issues, whilst still maintaining a primarily 'income-investment' approach, by moving towards collective Income-Investment-Trusts, which provide access to global markets as well as emerging sectors, and which definitely deliver on one of my
primary goals of a much more 'hands-off' approach by contracting out almost all of the day-to-day company-level issues to those IT-managers who run the trusts, understand their markets, and manage those remits for me over the long term.
The primary change that I've clearly seen over the years since I've moved
away from a HYP, single-company, 'high-yield' approach has been that I've now fully accepted that the level of income I was initially seeking
from my investment capital when first using a HYP approach, where yields of around 6% or higher wouldn't have been out of the ordinary in terms of where I might have been investing towards with a HYP hat on, was one of the primary problems, for me at least,
of that particular strategy.
Having just taken a look at my 13 globally and sectorally diverse income-IT holdings, I can see that almost all of them are yielding 4.5% or lower, with my overall income-portfolio currently standing at a forecast yield of around 4.2%, and whilst it's clear that HYP investors who
are happy with their own approach might consider that type of income-return to perhaps be 'inadequate', I would honestly consider such a view to be at the heart of the main issues that I
personally had with the HYP strategy itself, where seeking much higher yields
generally brings with it problems that I simply wasn't happy to live with over the long-term investment time-scales that I was looking for...
And that's probably as good a point as any to come back to your main point about 'common sense prevailing', because I think it's much more nuanced than that, and it's more to do with just accepting that different investors will have different levels of
tolerance to different issues, and what I think has happened over recent years is that the issues with the HYP approach have become better understood and more visible in terms of the discussions around them, but that's not to say that even then, there might not be investors who are still quite happy to
live with those issues, if by doing so they personally still get some worthwhile benefits from doing so - it's just that for me personally, it
wasn't 'worth it'....
Cheers,
Itsallaguess