IUKD for AEI

[yieldhog]

Thanks yieldhog for starting this post.
Your portfolio over the last 15 years sounds as though you have done pretty well.
Can I ask if you could give us a breakdown of your portfolio for those of us who
are trying the same approach?
I know it depends on where you are in the investing life but I am pretty close to
your age so I would like to compare ideas.
Many thanks.

I promised a link to my SIPP portfolio for 2023 and found that it appeared in the TMF Portfolio Management and Review section on December 26th 2023. I will try to post an actual link but I'm not very good at navigating this TMF site. I'll try again later.

Meanwhile, for simplicity, here is the portfolio I started with this year. It's been simplified from last but should still yield about 7.5% and some growth.

AEI
BATS
CAML
NCYF
FORT
HFEL
HINT
IMB
IAT
1APD
IUKD
JEGI
JGGI
LGEN
NAIT
PHNX
SMIF
VOD
VSL

Since the start of the year I've Sold IUKD and replaced with AEI.
Note that VSL is liquidating and will need to be replaced soon.

My objectives this year are to further simplify the portfolio and eliminate single company exposures, such as PHNX, IMB, CAML enc.

Hope this helps.

Y

[yieldhog]

I couldn't figure out how to post the actual link, but here is my 2023 portfolio:

Here's the SIPP portfolio I started with on Jan1,2023.
I'm 76 and the SIPP provides me with a modest supplemental income. It's been in drawdown for about 15-years.
My objectives now are to simplify so that my wife can manage it and continue to receive a modest income.
I accept that I will need to sacrifice yield to achieve my objectives.High Yield Fixed Income

High Yield Fixed Income
GACA 8.875 Cum Pref Sold
GACB 7.875 Cum Pref Sold
MBSP 6.75 PIBS Sold
SANB Pref Sold
NCYF
SMIF
VSL
Large Cap UK Equities
AEI
BATS
IUKD
IMB
LGEN
MNG Sold
PHNX
World ITs and ETFs
HFEL (Far East) Sold 50%
HINT (Non-UK Equity Income)
IAT (Asia x-Japan Equity Income)
IAPD (Asia)
JEGI (Europe G+I)
JGGI (Global G+I}
NAIT (North America)
Natural Resources
BWRM (World Mining and Metals) Sold
Small Cap And VC
BVT Sold
Speculative Equities
BDEV, BWY. POLY All Sold

The portfolio produced a dividend yield of 7.52%
Nett realized gain of 1,77%
Change in value based on today's market value -0.68%
Drawdown of 3.90%
Taking account of monthly drawdown, I calculate that is Total Return of 12.51% before taking account of inflation.

At the start of the year there were 26 positions.
I will start the New Year with 19 positions and a projected yield of 7.31 based on my book costs. At market prices the projected yield would be 7.75%. These figures are of course based on my weightings.

Happy New Year to All

Y
(total recs 2)

[moorfield]

My objectives now are to simplify so that my wife can manage it and continue to receive a modest income.
I accept that I will need to sacrifice yield to achieve my objectives.High Yield Fixed Income

It's always interesting to explore how folk intend to simplify their portfolios for their (typically much less hands on) spouses.

Taking that intention to its logical conclusion, and given the subject of the thread, then why not put everything into just AEI? Very very easily for your wife to manage, after all.

[yieldhog]

My objectives now are to simplify so that my wife can manage it and continue to receive a modest income.
I accept that I will need to sacrifice yield to achieve my objectives.High Yield Fixed Income

It's always interesting to explore how folk intend to simplify their portfolios for their (typically much less hands on) spouses.

Taking that intention to its logical conclusion, and given the subject of the thread, then why not put everything into just AEI? Very very easily for your wife to manage, after all.

That is a good logical thought and one that crossed my mind, fleetingly. However, it has a few flaws that rule it out for me personally.
1. Never good to put all your eggs in one basket.
2. Not enough geographic or sectoral diversification.
3. Too much reliance on one asset manager and not one I'm particularly fond of.
Probably a host of other reasons why not but I'll leave it there.

Y

[bonrepos]

Yieldhog, thanks for taking the time to post your portfolio.
I read the latest comment about using AEI as the main share for a simplified
approach to investing and like you thought it a bit odd.
I hold AEI and have been pleased with the dividend but the total return on most
time lines is a disaster relative to the rest of the sector.
As you say, a quiet life is probably based on diversification and using a more global
approach.
AEI reminds me a bit of HFEL , wonderful above average dividend but it comes out
of your capital to pay for it.
As I get older a tracker seems to tick most boxes although I'm not there yet!

[PrefInvestor]

Hi yieldhog, Thanks for posting your portfolio which was very interesting. I too am a High Yield income investor though using ISAs rather than a SIPP. My age is not a lot different to yours.

Looking at your portfolio I either have many of your holdings within my current portfolio already or I have held most of them at some point in time. I would make the following comments and observations:-

1. You had a number of Preference Shares but have now sold them it seems. I have 9 holdings in this sector, all yielding 7%+ at my purchase prices, and I’m looking forward to the forthcoming dividend season for these investments which starts soon. If interest rates do fall as I am expecting then these should do well from a capital perspective and deliver good dividends. 2026 is a risk and I am expecting some tender offers, but I hope to make a profit from those as I did with BWSA & BOI not long ago. Fingers crossed…

2. You seem to have avoided holding any renewable energy or commercial property investments (REITs). These are both quite high yielding sectors but have not fared well in the high interest rate environment, you have probably done well by avoiding them. Big discounts on these investments, at some point the tide will turn and they will do well again I reckon. They both need interest rates to come down to recover I think.

3. You are currently holding a few investments that I am avoiding, ATM anyway, as I see them as value traps – HFEL, AEI, IUKD, PHNX. I’ll say no more about these as you clearly see them differently, I wish you all the best with them……

4. This business about simplifying ones portfolio to be able to hand it on to your spouse is one that comes up quite often on these boards. From my perspective my ISAs will simply transfer to become hers and all she needs to do is to login occasionally to withdraw the dividend income. I don’t (and wont) invest in anything that needs to be actively traded. She might need to do something about some corporate actions I guess (eg a Pref tender offer), but most she can probably ignore. But I am interested to know how others deal with this, reducing a portfolio to a small number of holdings presents many problems I think (as you’ve said in your latest post) and I’m not keen on that idea.

ATB

Pref

[moorfield]

It's always interesting to explore how folk intend to simplify their portfolios for their (typically much less hands on) spouses.

Taking that intention to its logical conclusion, and given the subject of the thread, then why not put everything into just AEI? Very very easily for your wife to manage, after all.

That is a good logical thought and one that crossed my mind, fleetingly. However, it has a few flaws that rule it out for me personally.
1. Never good to put all your eggs in one basket.
2. Not enough geographic or sectoral diversification.
3. Too much reliance on one asset manager and not one I'm particularly fond of.
Probably a host of other reasons why not but I'll leave it there.

Y

Yes these are common and understandable concerns, but I think also flawed thinking - in the context of this mini (and slightly morbid) discussion, sorry if I veer o/t - ie.organising ones affairs to be handed over to ones executor and/or spouse.

#2 Diversification. AEI holds 50+ FTSE companies that operate all over the world. I get one might want also hold something with "far east" or "global outlook, say, but global ITs exist too! MYI for example, which also holds 50+ companies worldwide. Quite soundly diversified. So no, I don't agree holding just one IT is flawed on the "diversification" argument, it's rather a case of selecting the one that most closely matches your appetite.

#1, #3 are essentially the same thing, the risk of going all in with one manager, quite understandable. I have read some harrumphing here from old/long timers about AEIs "management". However these sentiments are nebulous at best and are not followed through - opinion then, not counting. And as I already mentioned above, counting tells us AEI has a long and stable dividend history. And that has not happened by accident, so I think reflects very well on the company's objectives, operation, and governance.


A last thought on this. Lady M is currently handling the estate of a relative - an utter ballache (figuratively, not anatomically) due to a left behind rental property (with sitting tenants), cash, jewellery, paintings, antiques all over the place, carers paid (dubiously) cash in hand, and family members sniping the not-so-subtle where's my money question.

In other words, make what you put into the probate pipe as simple as you can. Your heirs will thank you, a lot, and the they can do what they want with it afterwards of course.

[PrefInvestor]

The portfolio produced a dividend yield of 7.52%
Nett realized gain of 1,77%
Change in value based on today's market value -0.68%
Drawdown of 3.90%
Taking account of monthly drawdown, I calculate that is Total Return of 12.51% before taking account of inflation.

Hi yieldhog, I am trying to understand your total return calculation as summarised in this extract from your post above. 12.5% total return seems a very high figure for what wasn’t a great investing year for many markets – unless you were heavily into US Growth stocks.

You appear to be calculating your total return by adding the portfolio nett gain, the drawdown percentage AND the dividends ?.

At first sight that sounds to me like it’s double counting the dividends ?. Any dividends taken as drawdown income will surely be included in the 3.9% drawdown figure (and so should not be added again). Any dividends that are re-invested will appear in the portfolio nett gain figure (so also should not be added again) ?.

Maybe I've got it wrong. Apologies if I’ve misunderstood your methodology…..?.

ATB

Pref

[yieldhog]

Hi yieldhog, I am trying to understand your total return calculation as summarised in this extract from your post above. 12.5% total return seems a very high figure for what wasn’t a great investing year for many markets – unless you were heavily into US Growth stocks.

You appear to be calculating your total return by adding the portfolio nett gain, the drawdown percentage AND the dividends ?.

Hi Prefinvestor,
That's a good question and one I have mulled over myself.

Before I start I should say that I revised those figures for some data that came in a bit late. The revised figures are:

Dividend return on investments 7.47%
Nett realised Profit/loss from investments + 1.77%
Market gain or loss - 0.10
Withdrawal of funds from the SIPP 3.90%

Hence Total Return before inflation 7.47 +1.77 -0.10 +3.90 = 13.04 %

Notes:
1. I keep a monthly spreadsheet of all dividends paid into the SIPP. At the end of the year I simply take the total of all dividends for the year and divide by the total of the fund at the start of the year and this is my dividend return.
2. Nett realised profit or loss is simply the result of taking a look at all disposals over the year and netting out to get a total figure and dividing by the same figure I used for the dividend return.
3. Market gain or loss is simply the total fund value at the year end divided by the value at the start of the year.
4. I take a monthly set amount from the SIPP every month and the total of this is divided by the fund value at the start of the year to get the withdrawal rate.
5. I do not take account of any interest on cash held in the fund because it's not significant

That' my simple methodology which I do not think is double counting but it may not be technically the most accurate way to calculate total return. I have no time for making things more complicated but if enough people think it's misleading then I will put a note on the post at the start of every year when I report annual returns to say what my methodology is.

Thanks gain for raising the issue. I will be interested in any responses.

Y

[88V8]

......

[PrefInvestor]

Notes:
1. I keep a monthly spreadsheet of all dividends paid into the SIPP. At the end of the year I simply take the total of all dividends for the year and divide by the total of the fund at the start of the year and this is my dividend return.
2. Nett realised profit or loss is simply the result of taking a look at all disposals over the year and netting out to get a total figure and dividing by the same figure I used for the dividend return.
3. Market gain or loss is simply the total fund value at the year end divided by the value at the start of the year.
4. I take a monthly set amount from the SIPP every month and the total of this is divided by the fund value at the start of the year to get the withdrawal rate.
5. I do not take account of any interest on cash held in the fund because it's not significant

Well yieldhog here are my comments:-
1. No problem with your dividend return figure. BUT given that it is your dividends that you are taking out to drawdown as income, that is the same money as you are counting as income and you cant count it AGAIN in your total return calculation by adding your dividend return to your “withdrawal of funds from SIPP” line item. That’s double counting.
2. Surely your market gain figure (item 3 on your list) will include any gains or losses from disposals (item 2 on your list) ?. I assume that any cash in your accounts is included in your fund valuations.
3. My view of total return is somewhat simpler than yours and it is that your total return is given by:-

How much was in the Fund at the end of the year (comprising the sum of all investment valuations plus cash)
LESS
How much was in the Fund at the start of the year (comprising the sum of all investment valuations plus cash)
PLUS The total amount that you took out as income
ALL DIVIDED BY How much was in the Fund at the start of the year.

Actually it’s a much simpler methodology than yours I think.

ATB

Pref

[monabri]

......

I agree!

[yieldhog]

Actually it’s a much simpler methodology than yours I think.

Having mulled it over I think you are correct. My gut feeling is that I should not include the net realised gain/loss as a seperate item in the calculation as it is included in the difference between starting and ending values for the SIPP. This would mean my total return figure comes down to 11.27 % before inflation or,, assuming an inflation rate of 4 % for 2023,
a Total Real Return of 7.27 %.

If I can make that every year on my SIPP I will be quite happy.

Thanks again for your input and corroboration from V8.

Y

[PrefInvestor]

Actually it’s a much simpler methodology than yours I think.

Having mulled it over I think you are correct. My gut feeling is that I should not include the net realised gain/loss as a seperate item in the calculation as it is included in the difference between starting and ending values for the SIPP. This would mean my total return figure comes down to 11.27 % before inflation or,, assuming an inflation rate of 4 % for 2023,
a Total Real Return of 7.27 %.

If I can make that every year on my SIPP I will be quite happy.

Thanks again for your input and corroboration from V8.

Y

No problem, sadly I have a tendency to be a bit of a pedant !.

I didnt see any corroboration from V8, is his ..... message some kind of private post that I dont know how to read ?.

Anyway ATB

Pref

[yieldhog]

Thanks again for your input and corroboration from V8.

88V8 wrote:
......


I agree!

Here it is.

Y

[PrefInvestor]

Thanks again for your input and corroboration from V8.

88V8 wrote:
......


I agree!

Here it is.

Y

All I see is a load of dots and monabri saying "I agree"....?

Pref

[monabri]

Here it is.

Y

All I see is a load of dots and monabri saying "I agree"....?

Pref

I thought 88V8 was as puzzled as I ( and hence the agreement )!

viewtopic.php?p=652363#p652363


I'm looking at a bunch of shares which mainly show a negative total return over the last 12 months and trying to reconcile it with Yieldhogs 13% TR claim for 2023 for said shares ( see the first post in the link)) .

[PrefInvestor]

Having mulled it over I think you are correct. My gut feeling is that I should not include the net realised gain/loss as a seperate item in the calculation as it is included in the difference between starting and ending values for the SIPP. This would mean my total return figure comes down to 11.27 % before inflation or,, assuming an inflation rate of 4 % for 2023,
a Total Real Return of 7.27 %.

If I can make that every year on my SIPP I will be quite happy.

Thanks again for your input and corroboration from V8.

Y

I am sorry Yieldhog I am sitting here reading this TLF thread again and I’m still troubled by your TR calculation.

Thinking about my own portfolio, at any instant in time it comprises a set of investments plus some cash. Investments get bought and sold sometimes which affects the cash balance. Occasionally dividends arrive adding to the cash and then that gets spent on buying some new investments. So in terms of the portfolio valuation at any time which (= the sum of the investment valuations plus the cash) then that includes all dividends received to date.

So at the end of the year to get my total return all I do is take the end of year portfolio valuation subtract the start of year valuation and divide by the start of year valuation. If I took any dividend income out then I’d need to add on that figure, but I personally don’t do that (but I could if I wanted to).

I too monitor the total sum of all of my dividend payments received and calculate what my portfolio is yielding, but I don’t add this into my total return calculation because I know that the dividends are already in there.

I can’t believe that you manage your portfolio significantly differently to the way that I’ve described. How else is there to do it ?.

So if your “Net profit or loss from investments” is in fact the difference between the start and end of year portfolio valuations then that ALREADY INCLUDES all your dividends. Yes you need to add in any amount you have drawndown as income, but you shouldn’t be adding on the amount of dividends you’ve received as they are already included.

I suspect that your total return for that year is in reality more like 1.77% (if that’s the portfolio value change) + 3.90% (drawdown amount) = 5.6%

This looks far more realistic when viewed in the context of the set of investments that you held, which as reported by monabri, was pretty poor in some cases.

ATB

Pref

[PrefInvestor]

Sorry that last sentence of my previous post should have read

“This looks far more realistic when viewed in the context of the set of investments that you held, which as reported by monabri, the performance of which was pretty poor in some cases.”

ATB

Pref

[EthicsGradient]

Hi yieldhog, I am trying to understand your total return calculation as summarised in this extract from your post above. 12.5% total return seems a very high figure for what wasn’t a great investing year for many markets – unless you were heavily into US Growth stocks.

You appear to be calculating your total return by adding the portfolio nett gain, the drawdown percentage AND the dividends ?.

Hi Prefinvestor,
That's a good question and one I have mulled over myself.

Before I start I should say that I revised those figures for some data that came in a bit late. The revised figures are:

Dividend return on investments 7.47%
Nett realised Profit/loss from investments + 1.77%
Market gain or loss - 0.10
Withdrawal of funds from the SIPP 3.90%

Hence Total Return before inflation 7.47 +1.77 -0.10 +3.90 = 13.04 %

Notes:
1. I keep a monthly spreadsheet of all dividends paid into the SIPP. At the end of the year I simply take the total of all dividends for the year and divide by the total of the fund at the start of the year and this is my dividend return.
2. Nett realised profit or loss is simply the result of taking a look at all disposals over the year and netting out to get a total figure and dividing by the same figure I used for the dividend return.
3. Market gain or loss is simply the total fund value at the year end divided by the value at the start of the year.
4. I take a monthly set amount from the SIPP every month and the total of this is divided by the fund value at the start of the year to get the withdrawal rate.
5. I do not take account of any interest on cash held in the fund because it's not significant

That' my simple methodology which I do not think is double counting but it may not be technically the most accurate way to calculate total return. I have no time for making things more complicated but if enough people think it's misleading then I will put a note on the post at the start of every year when I report annual returns to say what my methodology is.

Thanks gain for raising the issue. I will be interested in any responses.

Y

I think, from these definitions, the total return could even be 3.90% - 0.10% = 3.8%. If the cash really is "not significant", then the total fund value went down by 0.1%, and 3.9% was taken out. Any dividends were "paid into the SIPP", ie quickly used to buy more assets (since "cash held" is not significant), and made the total fund value drop look no so bad (like with an accumulation fund). But if you took some dividends out as well as the monthly fixed amount, then the total return could be more.