Re: TJH Portfolio adjustment

[88V8]

It would have been .
Back when divis were not taxed
Ahh those golden days.

If you have the good sense to keep your investments in an ISA, they are not.

When we moved house 12 years ago it was or seemed sensible to liquidate a large part of our ISAs to realise capital tax-free.
Now, only 35% of our investments are in ISAs. Alas.

V8

[tjh290633]

If you have the good sense to keep your investments in an ISA, they are not.

When we moved house 12 years ago it was or seemed sensible to liquidate a large part of our ISAs to realise capital tax-free.
Now, only 35% of our investments are in ISAs. Alas.

V8

I have no investments outside the shelter of an ISA. When needing capital I liquidated those outside. How come you didn't do the same?

TJH

[Arborbridge]

A quick glance shows the TR over 10 years of 17%, so it looks as though the income has been "expensively bought".

I am not sure how you calculate “Total Return”, but my XIRR calculation for Abrdn Equity Income (AEI) gives an “Annual Return” of 1.99%, from 28 October 2013 to 27 October 2023 – 10 years.

The price would have dropped from 407.00 GBp to 294.00 GBp (-113.00 GBp, -27.76%). Meanwhile, having purchased at a yield of 5.06%, 186.30 GBp per share would have been received in the form of dividends, eclipsing the loss of capital, and making the “Annual Return” a small positive.

Enjoy!


Ian

I just lifted that percentage from AIC:

https://www.theaic.co.uk/companydata/ab ... come-trust

[Arborbridge]

All Moorfield is doing is illustrating the age old dilemma, when is a high yield too high? I do not want a yield that is at the expense of capital, whether deliberately as in the case of some ITs, or market sentiment as in the case of many/most high yield shares.

Ha ha, now don't get me started...

Anyway, tax makes little difference on a total return of 1.99% over 10 years, but that is awful. Dearly bought income indeed.

Moorfield needs to do better than that.

I am not alone, and the same can be said of many a HYP share, of course.

That last is a puzzling comment in the current context. Are you standing by the idea? or are you now saying you are not alone in choosing a poor investment so you rule out the AEI trust as a TJH improver? Or are you saying it was all just a wind up to see if we spotted your joke candidate?

[Dod101]

All Moorfield is doing is illustrating the age old dilemma, when is a high yield too high? I do not want a yield that is at the expense of capital, whether deliberately as in the case of some ITs, or market sentiment as in the case of many/most high yield shares.

Ha ha, now don't get me started...

Anyway, tax makes little difference on a total return of 1.99% over 10 years, but that is awful. Dearly bought income indeed.

Moorfield needs to do better than that.

I am not alone, and the same can be said of many a HYP share, of course.

I agree with you re many a HYP share. In fact in the current market, Shell is a stand out good TR share despite a relatively poor yield so throwing out say Shell in favour of your chosen IT may not be such a bright idea. In the end TR is what matters to most of us because without the capital you will not have the means to garner the income. Over emphasis on income can lead to disaster.

Dod

[Arborbridge]

Ha ha, now don't get me started...





I am not alone, and the same can be said of many a HYP share, of course.

I agree with you re many a HYP share. In fact in the current market, Shell is a stand out good TR share despite a relatively poor yield so throwing out say Shell in favour of your chosen IT may not be such a bright idea. In the end TR is what matters to most of us because without the capital you will not have the means to garner the income. Over emphasis on income can lead to disaster.

Dod

Certainly at company share level yes - and I've had few! But at the portfolio level, disaster is far less likely, which is the whole point of having a portfolio. ITs have their company disasters too, but we do not normally worry about that because we pay a manager to worry for us.

Arb

[88V8]

When we moved house 12 years ago it was or seemed sensible to liquidate a large part of our ISAs to realise capital tax-free.
Now, only 35% of our investments are in ISAs. Alas.

I have no investments outside the shelter of an ISA. When needing capital I liquidated those outside. How come you didn't do the same?

CGT.

Whether we've since lost more in divi tax than we saved in CGT would be a futile calculation, but over time I do not doubt that we will, given the higher tax rates and lower allowances.
We both put the max into our ISAs every year but it only scratches the surface of our unsheltered portfolio... nice problem to have of course.

V8

[moorfield]

Moorfield

Whilst I am no defender of TJH as I am not a follower of his selling methods, I think that this is such a poorly thought out post that it deserves to be debunked.

Why on earth would you invest in such a 'poor yielding' IT when you could put all of the money that you have liquidated into a much higher yielder such as Legal & General? They are a good solid company, aren't they? and the yield on them is 9.54%, 1.65% higher.

You may also want to write to Aberdeen and ask them why they don't sell their holdings in BHP, BP, BA., NG., SSE, SHEL and RIO since they are all in their top 30 investments and are dragging down their yield! I've not looked at the yield on their other investments but you may find that this doesn't give a yield that would suggest that 7.89% is sustainable. However, it may be that in the current climate, you are buying at a discount to NAV, but then again, there may be a good reason that their discount is higher than other ITs...

Anyone can look through a list of ITs and select the one which currently has a high yield and has a good dividend history, pick the best yield of those and then say that because it has done well in the past, it will obviously do well in the future. I'm sure that those investing in the fund managed by Woodford thought the same.

It is dangerous to place too much confidence in past results and in fact one of my issues with the TJH method is that sometimes you are in danger of selling reliable dividends in companies whose share price goes up because they are getting good results, for higher dividends with companies who may not continue to give such high yields in future. However, at least TJH recognises that he needs diversification in his portfolio and does try to maximise his yield in the short-term. Therefore he is protected from a Woodford scenario and whilst I am sure that your post is somewhat tongue in cheek to provoke a rebuttal, it may tempt less wary investors to follow your 'bet the farm' method of choosing shares.

I am reminded of an old TMF poster could JimSusan who had all his investments in Lloyds because they were a bank and banks never fail. We haven't heard from him since the 2008 banking crisis.

Chris

Using one IT is an exaggerated (and slightly lazy on my part) example here. I'm sure the point can be grasped that line could equally be the overall yield of a portfolio of ITs across different sectors (UK, Overseas, Debt, Property, Specialist). It's not too difficult to build a small portfolio of ITs yielding north of 7.0%. Think about overall portfolio yields, not necessarily the one example used here, and you'll find less to debunk if anything.

Just to come back on this point I now have an example I can illustrate, here. Although I will continue to use AEI (lazily) as a reference, I'll include my comments as a disclaimer on future posts. Thanks for your input here Chris.