Arbit, HYP and OEICs 2023 Q4

[Arborbridge]

Here's the usual:-



The smoothing of the Its does rather attractive. Meanwhile, the HYP didn't have a very good December so it is not making much progress, and the OEICS look even worse! Over the period, there isn't much to choose between all three as regards accumulated income, and all are on a par with an RPI inflation lifted invesment accumulation.

As regards how this is affecting my own investments: the amount I have in ITs and HYP is closing on being equal, whereas years ago the HYP was bigger by a factor of almost two.


Arb.

[Hypster]

Hi Arb,

Would I be right in thinking the blue line is the total of all dividends paid by the individual companies within your portfolio, whereas the pink line is not the total of the individual dividends paid by the constituents of the IT, but the distribution declared by the IT?

Couldn't you recreate the smoothing effect in your own HYP by placing, say, 20% of the declared dividends in a reserve tank, then use that to boost the income in the leaner periods? Your blue line would then look very much like your pink line (i.e. lower during excess periods but not dropping as far during the lean periods).

[Arborbridge]

Hi Arb,

Would I be right in thinking the blue line is the total of all dividends paid by the individual companies within your portfolio, whereas the pink line is not the total of the individual dividends paid by the constituents of the IT, but the distribution declared by the IT?

Couldn't you recreate the smoothing effect in your own HYP by placing, say, 20% of the declared dividends in a reserve tank, then use that to boost the income in the leaner periods? Your blue line would then look very much like your pink line (i.e. lower during excess periods but not dropping as far during the lean periods).

Yes, that is the factual difference. I practice, I do that more or less in the way you suggest for my income drawn. I have a reserve tank and also a Safety Margin - in effect I do not spend all the dividends but re-invest about half of them.
I don't believe that's the correct way to do it for this exercise - people need to see the difference between the three streams as they happen rather than apply your idea. Over the long timescale you can see the OEICS and HYP are more volatile, and that is just the truth of it - they respond more immdeiately to changes in company policy and profitability

Arb.

[BullDog]

Hi Arb,

Would I be right in thinking the blue line is the total of all dividends paid by the individual companies within your portfolio, whereas the pink line is not the total of the individual dividends paid by the constituents of the IT, but the distribution declared by the IT?

Couldn't you recreate the smoothing effect in your own HYP by placing, say, 20% of the declared dividends in a reserve tank, then use that to boost the income in the leaner periods? Your blue line would then look very much like your pink line (i.e. lower during excess periods but not dropping as far during the lean periods).

Yes, that is the factual difference. I practice, I do that more or less in the way you suggest for my income drawn. I have a reserve tank and also a Safety Margin - in effect I do not spend all the dividends but re-invest about half of them.
I don't believe that's the correct way to do it for this exercise - people need to see the difference between the three streams as they happen rather than apply your idea. Over the long timescale you can see the OEICS and HYP are more volatile, and that is just the truth of it - they respond more immdeiately to changes in company policy and profitability

Arb.

In fact, it's what one might expect. So it's good to see it actually does work that way.