Minimal risk asset?

[JohnW]

If you don't mind me asking, where you ever tempted to try the HYP approach instead of capital drawdown?
VC

Have a sniff around this site, then tell us what would tempt you to try stock picking and foregoing some of the benefit of divesification which seem to characterise a HYP approach.
https://www.bogleheads.org/wiki/Main_Page

[veeCodger1]

If you don't mind me asking, where you ever tempted to try the HYP approach instead of capital drawdown?
VC

Have a sniff around this site, then tell us what would tempt you to try stock picking and foregoing some of the benefit of divesification which seem to characterise a HYP approach.
https://www.bogleheads.org/wiki/Main_Page

Thank you for the link.
You asked what tempted me to try stock picking. I have only done this via an HYP approach. But with the benefit of hindsight I think a total return approach e.g. world tracker or S&P500 tracker would have performed better. I am now moving funds from HYP into total return.

Also, I recently invested into some high yielding ITs e.g. CTY, but the capital has dropped a lot in these.

Also, I recently invested in some 'successful' managed funds with a good track record e.g. Blue whale and Fundsmith.

The link you provided seems to indicate it is very difficult to pick managed funds that will continue to deliver. Hence, most people are probably better off, like the OP, with a global tracker.

VC

[JohnW]

But with the benefit of hindsight I think a total return approach e.g. world tracker or S&P500 tracker would have performed better.
VC

Just be more than a little bit careful about choosing your investment strategy based on what gave a better return in the past. There's likely to be always something in the future that will give a better return than anything you choose now. Chopping and changing can be wealth destroying and soul destroying? Perhaps go back and read more from that link! Spend a week or two dipping your toes into the forum - there are some smart folk there.
Maybe read around to develop your own investing philosophy, identifying the principles which govern it, and then decide which products you can use to implement the ideas. In my view it really should be something you can stick with through thick and thin, and well enough thought out for you to have confidence in it.

[1nvest]

it is very difficult to pick managed funds that will continue to deliver. Hence, most people are probably better off, like the OP, with a global tracker.

So those that market/provide such products would prefer you believed.

Since 1980 pretty much everything has provided a decent reward. The failings during the 1970's wiped out much of values and saw high inflation and interest rates. Some complain how recently real (after inflation) yields are marginally negative, but back then at times real yields were massively negative. Even when yields/interest rates were up at 15% levels, when inflation was running at 25% you were losing 10% of purchase power ... type situation.

In effect investors have been subsequently compensated for that failing, and as such bonds, stocks ...etc have rewarded above long term averages. Progressively declining yields down from double digits to very low levels has the effect of driving bonds and stocks to provide above average rewards. From present low interest rate levels that isn't a trend that can continue.

A concern with global funds as I see it are all the hidden extra costs. Countries take different slices out of dividends/interest according to whatever their policy of 'withholding tax' rates. France for instance has imposed 70% withholding taxes to some. Index providers, that calculate the mathematical indexes may opt to discount such costs, and provide a net total return figure for the index, that a fund might then 'benchmark' to. And the fund of course applies its own costs to cover its costs and provide profits out of provision of their 'product' (fund).

Market makers used to really exploit investors, often setting bid/ask spreads of +10% or more.

As I see it, global funds with their broad diversity into many different markets and political (taxation) regimes is a form of multi-layered costs, before you finally receive (hopefully) a positive reward, which HMRC will then look to take a slice.

Many invest to offset inflation, and hopefully achieve a positive return on top of that, after costs and taxes. Governments induce inflation in order to force you to invest or otherwise risk seeing the value decayed by inflation. If you stuffed £ notes under a bed in 1972 then to recent that money would have annualised a 5.7% decay of its purchase power (RPI). If however instead of just £'s stuffed under the bed you stored equal amounts of £'s, US $ and gold, adjusting that each year back to around equal capital values, then that 'money' would have lost -1.5% annualised (decay in purchase power). If you'd invested the third held as $'s into US stocks instead of holding $'s under the bed, then you'd have negated inflation altogether. If you'd also deposited the £'s into earning interest (cash deposit account) then the collective value of that portfolio would have grown at over 4% annualised.

Holding a third each in domestic currency (£'s), primary reserve currency (US$) and global currency (gold), whilst being asset diversified across 'bonds' (cash deposits), stocks (US) and commodity (gold), potentially can be achieved with lower costs/taxes than going with a global stock (and/or bond) fund(s).

When it comes to spending some, just avoid spending whichever currency (£, $ or gold) that is down at the time. Better to spend the currency that is relatively up at the time. As more often the ones that are down this year, maybe the best in another year, whilst the ones that are presently best may later be the worst.

Again this chart is total returns, before costs/taxes, but there is considerable transparency in those costs and taxes and there are means to keep cost/taxes reasonably low.



And once you're familiar with that asset allocation, it can be very Zen like. When others are running around shouting that the Pound, or Dollar, or Gold is down (or up), or that stocks (or gold) is crashing due to x, y or z, you can just turn your head to the other side of the comfee chair and continue dozing in the knowledge that such transitions periodically come along and when you next review you'll just be adding more of x, reducing y and that no other action is required - as after all, where else could you move money to without becoming more predictive/preemptive (a.k.a speculative).

2000 dot com bubble bursting and the worst year was (nominal) a -3.8% decline (2002). 2000 and 2001 when others were seeing sizeable stock price declines and the above pretty much broke even in both of those years. 2008/9 financial crisis years and it was up over +11% in both years. Current Covid-19 year and at the start of 2020 the £/$ was around 1.32, more recently its 1.28, whilst US stock prices (excluding dividends) are pretty much back up to where they started the year, so the third in $'s has primarily been just currency gains year to date of around +3%. UK cash third, as good as 0%. Gold however in £ terms is up around +30%. So across the Covid panic period the portfolio is up around +10% year to date. If I were to speculate I'd guess forward time might see gold down, stocks up, perhaps also £ up after Brexit uncertainties fade and maybe $ down as investors who flighted into the US $ for safety move that money elsewhere looking for higher rewards. But each/any/all of those predictions could be completely wrong. Best not to speculate.

For a US investor whose domestic currency was also the primary reserve currency I guess they'd be more inclined to hold this For them 2008 would have been a relatively bad year, -10% down, but that followed a year with a +13% gain (2007) and was further compensated by a reasonable +17% gain in the next year (2009)

[tjh290633]

HYP struck me as more of the same -even more complicated gambling relying on dividends

I know that it is historical and might not be a good guide to the future, but the record of dividends/unit for my HYP, compared with the RPI is:

.            Unitised             Change            
         .   Ordinary    RPI      Ordinary    RPI   
Year to      Divs/unit            Divs/unit         
05-Apr-88         2.83   101.80                     
05-Apr-89         2.25   114.30     -20.38%   12.28%
05-Apr-90         3.40   125.10      51.11%    9.45%
05-Apr-91         4.67   133.10      37.21%    6.39%
05-Apr-92         5.94   138.80      27.25%    4.28%
05-Apr-93         5.52   140.60      -7.12%    1.30%
05-Apr-94         5.31   144.20      -3.81%    2.56%
05-Apr-95         6.45   149.00      21.55%    3.33%
05-Apr-96         6.27   152.60      -2.85%    2.42%
05-Apr-97         7.13   156.30      13.74%    2.42%
05-Apr-98         7.55   162.60       5.93%    4.03%
05-Apr-99         7.92   165.20       4.93%    1.60%
05-Apr-00        10.79   170.10      36.11%    2.97%
05-Apr-01        11.39   173.10       5.61%    1.76%
05-Apr-02        12.46   175.70       9.36%    1.50%
05-Apr-03        11.68   181.20      -6.22%    3.13%
05-Apr-04        11.13   185.70      -4.70%    2.48%
05-Apr-05        13.03   191.60      17.01%    3.18%
05-Apr-06        14.21   196.50       9.11%    2.56%
05-Apr-07        15.18   205.40       6.78%    4.53%
05-Apr-08        18.73   214.00      23.40%    4.19%
05-Apr-09        21.60   211.50      15.30%   -1.17%
05-Apr-10        11.91   222.80     -44.84%    5.34%
05-Apr-11        15.12   234.40      26.98%    5.21%
05-Apr-12        17.78   242.50      17.59%    3.46%
05-Apr-13        19.93   249.50      12.06%    2.89%
05-Apr-14        20.34   254.80       2.05%    2.12%
05-Apr-15        21.35   258.00       4.99%    1.26%
05-Apr-16        21.68   261.40       1.55%    1.32%
05-Apr-17        24.17   270.60      11.46%    3.52%
05-Apr-18        27.02   279.70      11.82%    3.36%
05-Apr-19        26.36   288.20      -2.46%    3.04%
05-Apr-20        29.71   289.50      12.72%    0.45%
05-Apr-21        13.41   289.50     -54.87%    0.45%

The current year is, of course, incomplete, but if you compare the dividends/unit with the RPI, you will note that the dividend/unit is up over 10-fold, while the RPI has approximately tripled. You can compare the present time with 2009-10, when dividends fell by about 45%, back to the level of 2003-4 which itself was a reflection of the dot-com boom and bust. Ignore the final RPI figure.

A modest reserve account, and not taking all of the dividends to help build up the investments by judicious reinvestment, takes care of those fluctuations.

TJH

[johnhemming]

I read an interesting book this week
https://www.collaborativefund.com/blog/ ... -of-money/

"The psychology of money" it is quite a novel viewpoint on investment decisions and is compatible with various forms of passive investing (as well as active investing).

[SalvorHardin]

I read an interesting book this week
https://www.collaborativefund.com/blog/ ... -of-money/

"The psychology of money" it is quite a novel viewpoint on investment decisions and is compatible with various forms of passive investing (as well as active investing).

I second this (just finished my copy).

A major theme of the book is how people can act in peculiar ways when making decisions concerning money. Despite what many academics claim, we are not the hyper-rational utility maximisers of neoclassical economics and efficient market theory.

There's plenty in the book for both passive and active investors.

The author, Morgan Housel, writes for The Wall Street Journal. He used to write for The Motley Fool, where his articles were always worth a look.

So are the articles on his blog.

[veeCodger1]

it is very difficult to pick managed funds that will continue to deliver. Hence, most people are probably better off, like the OP, with a global tracker.

So those that market/provide such products would prefer you believed.

Since 1980 pretty much everything has provided a decent reward. The failings during the 1970's wiped out much of values and saw high inflation and interest rates. Some complain how recently real (after inflation) yields are marginally negative, but back then at times real yields were massively negative. Even when yields/interest rates were up at 15% levels, when inflation was running at 25% you were losing 10% of purchase power ... type situation.

In effect investors have been subsequently compensated for that failing, and as such bonds, stocks ...etc have rewarded above long term averages. Progressively declining yields down from double digits to very low levels has the effect of driving bonds and stocks to provide above average rewards. From present low interest rate levels that isn't a trend that can continue.

A concern with global funds as I see it are all the hidden extra costs. Countries take different slices out of dividends/interest according to whatever their policy of 'withholding tax' rates. France for instance has imposed 70% withholding taxes to some. Index providers, that calculate the mathematical indexes may opt to discount such costs, and provide a net total return figure for the index, that a fund might then 'benchmark' to. And the fund of course applies its own costs to cover its costs and provide profits out of provision of their 'product' (fund).

Market makers used to really exploit investors, often setting bid/ask spreads of +10% or more.

As I see it, global funds with their broad diversity into many different markets and political (taxation) regimes is a form of multi-layered costs, before you finally receive (hopefully) a positive reward, which HMRC will then look to take a slice.

Many invest to offset inflation, and hopefully achieve a positive return on top of that, after costs and taxes. Governments induce inflation in order to force you to invest or otherwise risk seeing the value decayed by inflation. If you stuffed £ notes under a bed in 1972 then to recent that money would have annualised a 5.7% decay of its purchase power (RPI). If however instead of just £'s stuffed under the bed you stored equal amounts of £'s, US $ and gold, adjusting that each year back to around equal capital values, then that 'money' would have lost -1.5% annualised (decay in purchase power). If you'd invested the third held as $'s into US stocks instead of holding $'s under the bed, then you'd have negated inflation altogether. If you'd also deposited the £'s into earning interest (cash deposit account) then the collective value of that portfolio would have grown at over 4% annualised.

Holding a third each in domestic currency (£'s), primary reserve currency (US$) and global currency (gold), whilst being asset diversified across 'bonds' (cash deposits), stocks (US) and commodity (gold), potentially can be achieved with lower costs/taxes than going with a global stock (and/or bond) fund(s).

When it comes to spending some, just avoid spending whichever currency (£, $ or gold) that is down at the time. Better to spend the currency that is relatively up at the time. As more often the ones that are down this year, maybe the best in another year, whilst the ones that are presently best may later be the worst.

Again this chart is total returns, before costs/taxes, but there is considerable transparency in those costs and taxes and there are means to keep cost/taxes reasonably low.



And once you're familiar with that asset allocation, it can be very Zen like. When others are running around shouting that the Pound, or Dollar, or Gold is down (or up), or that stocks (or gold) is crashing due to x, y or z, you can just turn your head to the other side of the comfee chair and continue dozing in the knowledge that such transitions periodically come along and when you next review you'll just be adding more of x, reducing y and that no other action is required - as after all, where else could you move money to without becoming more predictive/preemptive (a.k.a speculative).

2000 dot com bubble bursting and the worst year was (nominal) a -3.8% decline (2002). 2000 and 2001 when others were seeing sizeable stock price declines and the above pretty much broke even in both of those years. 2008/9 financial crisis years and it was up over +11% in both years. Current Covid-19 year and at the start of 2020 the £/$ was around 1.32, more recently its 1.28, whilst US stock prices (excluding dividends) are pretty much back up to where they started the year, so the third in $'s has primarily been just currency gains year to date of around +3%. UK cash third, as good as 0%. Gold however in £ terms is up around +30%. So across the Covid panic period the portfolio is up around +10% year to date. If I were to speculate I'd guess forward time might see gold down, stocks up, perhaps also £ up after Brexit uncertainties fade and maybe $ down as investors who flighted into the US $ for safety move that money elsewhere looking for higher rewards. But each/any/all of those predictions could be completely wrong. Best not to speculate.

For a US investor whose domestic currency was also the primary reserve currency I guess they'd be more inclined to hold this For them 2008 would have been a relatively bad year, -10% down, but that followed a year with a +13% gain (2007) and was further compensated by a reasonable +17% gain in the next year (2009)

These are interesting views.

Are you basically saying the ideal portfolio going forward for a UK resident is: cash, S&P500 tracker and gold? Gold does seem to have mixed views amongst investors. I don't hold any but after reading your comments I may change my approach.

VC

[veeCodger1]

HYP struck me as more of the same -even more complicated gambling relying on dividends

I know that it is historical and might not be a good guide to the future, but the record of dividends/unit for my HYP, compared with the RPI is:

.            Unitised             Change            
         .   Ordinary    RPI      Ordinary    RPI   
Year to      Divs/unit            Divs/unit         
05-Apr-88         2.83   101.80                     
05-Apr-89         2.25   114.30     -20.38%   12.28%
05-Apr-90         3.40   125.10      51.11%    9.45%
05-Apr-91         4.67   133.10      37.21%    6.39%
05-Apr-92         5.94   138.80      27.25%    4.28%
05-Apr-93         5.52   140.60      -7.12%    1.30%
05-Apr-94         5.31   144.20      -3.81%    2.56%
05-Apr-95         6.45   149.00      21.55%    3.33%
05-Apr-96         6.27   152.60      -2.85%    2.42%
05-Apr-97         7.13   156.30      13.74%    2.42%
05-Apr-98         7.55   162.60       5.93%    4.03%
05-Apr-99         7.92   165.20       4.93%    1.60%
05-Apr-00        10.79   170.10      36.11%    2.97%
05-Apr-01        11.39   173.10       5.61%    1.76%
05-Apr-02        12.46   175.70       9.36%    1.50%
05-Apr-03        11.68   181.20      -6.22%    3.13%
05-Apr-04        11.13   185.70      -4.70%    2.48%
05-Apr-05        13.03   191.60      17.01%    3.18%
05-Apr-06        14.21   196.50       9.11%    2.56%
05-Apr-07        15.18   205.40       6.78%    4.53%
05-Apr-08        18.73   214.00      23.40%    4.19%
05-Apr-09        21.60   211.50      15.30%   -1.17%
05-Apr-10        11.91   222.80     -44.84%    5.34%
05-Apr-11        15.12   234.40      26.98%    5.21%
05-Apr-12        17.78   242.50      17.59%    3.46%
05-Apr-13        19.93   249.50      12.06%    2.89%
05-Apr-14        20.34   254.80       2.05%    2.12%
05-Apr-15        21.35   258.00       4.99%    1.26%
05-Apr-16        21.68   261.40       1.55%    1.32%
05-Apr-17        24.17   270.60      11.46%    3.52%
05-Apr-18        27.02   279.70      11.82%    3.36%
05-Apr-19        26.36   288.20      -2.46%    3.04%
05-Apr-20        29.71   289.50      12.72%    0.45%
05-Apr-21        13.41   289.50     -54.87%    0.45%

The current year is, of course, incomplete, but if you compare the dividends/unit with the RPI, you will note that the dividend/unit is up over 10-fold, while the RPI has approximately tripled. You can compare the present time with 2009-10, when dividends fell by about 45%, back to the level of 2003-4 which itself was a reflection of the dot-com boom and bust. Ignore the final RPI figure.

A modest reserve account, and not taking all of the dividends to help build up the investments by judicious reinvestment, takes care of those fluctuations.

TJH

That is an impressive track record. I understand you do some calculated selling/trimming/buying and perhaps this is where some skill lies and results in a good HYP. Unfortunately, my HYP approach, buy and hold, has not proved as successful and as such I am looking to sell some HYP and buy elsewhere.

VC

[Spet0789]

it is very difficult to pick managed funds that will continue to deliver. Hence, most people are probably better off, like the OP, with a global tracker.

So those that market/provide such products would prefer you believed.

Since 1980 pretty much everything has provided a decent reward. The failings during the 1970's wiped out much of values and saw high inflation and interest rates. Some complain how recently real (after inflation) yields are marginally negative, but back then at times real yields were massively negative. Even when yields/interest rates were up at 15% levels, when inflation was running at 25% you were losing 10% of purchase power ... type situation.

In effect investors have been subsequently compensated for that failing, and as such bonds, stocks ...etc have rewarded above long term averages. Progressively declining yields down from double digits to very low levels has the effect of driving bonds and stocks to provide above average rewards. From present low interest rate levels that isn't a trend that can continue.

A concern with global funds as I see it are all the hidden extra costs. Countries take different slices out of dividends/interest according to whatever their policy of 'withholding tax' rates. France for instance has imposed 70% withholding taxes to some. Index providers, that calculate the mathematical indexes may opt to discount such costs, and provide a net total return figure for the index, that a fund might then 'benchmark' to. And the fund of course applies its own costs to cover its costs and provide profits out of provision of their 'product' (fund).

Market makers used to really exploit investors, often setting bid/ask spreads of +10% or more.

As I see it, global funds with their broad diversity into many different markets and political (taxation) regimes is a form of multi-layered costs, before you finally receive (hopefully) a positive reward, which HMRC will then look to take a slice.

Many invest to offset inflation, and hopefully achieve a positive return on top of that, after costs and taxes. Governments induce inflation in order to force you to invest or otherwise risk seeing the value decayed by inflation. If you stuffed £ notes under a bed in 1972 then to recent that money would have annualised a 5.7% decay of its purchase power (RPI). If however instead of just £'s stuffed under the bed you stored equal amounts of £'s, US $ and gold, adjusting that each year back to around equal capital values, then that 'money' would have lost -1.5% annualised (decay in purchase power). If you'd invested the third held as $'s into US stocks instead of holding $'s under the bed, then you'd have negated inflation altogether. If you'd also deposited the £'s into earning interest (cash deposit account) then the collective value of that portfolio would have grown at over 4% annualised.

Holding a third each in domestic currency (£'s), primary reserve currency (US$) and global currency (gold), whilst being asset diversified across 'bonds' (cash deposits), stocks (US) and commodity (gold), potentially can be achieved with lower costs/taxes than going with a global stock (and/or bond) fund(s).

When it comes to spending some, just avoid spending whichever currency (£, $ or gold) that is down at the time. Better to spend the currency that is relatively up at the time. As more often the ones that are down this year, maybe the best in another year, whilst the ones that are presently best may later be the worst.

Again this chart is total returns, before costs/taxes, but there is considerable transparency in those costs and taxes and there are means to keep cost/taxes reasonably low.



And once you're familiar with that asset allocation, it can be very Zen like. When others are running around shouting that the Pound, or Dollar, or Gold is down (or up), or that stocks (or gold) is crashing due to x, y or z, you can just turn your head to the other side of the comfee chair and continue dozing in the knowledge that such transitions periodically come along and when you next review you'll just be adding more of x, reducing y and that no other action is required - as after all, where else could you move money to without becoming more predictive/preemptive (a.k.a speculative).

2000 dot com bubble bursting and the worst year was (nominal) a -3.8% decline (2002). 2000 and 2001 when others were seeing sizeable stock price declines and the above pretty much broke even in both of those years. 2008/9 financial crisis years and it was up over +11% in both years. Current Covid-19 year and at the start of 2020 the £/$ was around 1.32, more recently its 1.28, whilst US stock prices (excluding dividends) are pretty much back up to where they started the year, so the third in $'s has primarily been just currency gains year to date of around +3%. UK cash third, as good as 0%. Gold however in £ terms is up around +30%. So across the Covid panic period the portfolio is up around +10% year to date. If I were to speculate I'd guess forward time might see gold down, stocks up, perhaps also £ up after Brexit uncertainties fade and maybe $ down as investors who flighted into the US $ for safety move that money elsewhere looking for higher rewards. But each/any/all of those predictions could be completely wrong. Best not to speculate.

For a US investor whose domestic currency was also the primary reserve currency I guess they'd be more inclined to hold this For them 2008 would have been a relatively bad year, -10% down, but that followed a year with a +13% gain (2007) and was further compensated by a reasonable +17% gain in the next year (2009)

I’ve disagreed with you on other topics but this is a very good post.

Personally I trim the Gold allocation to 20% and divide between physical and gold equities (the latter have more volatility due to operating leverage) and add a little to global equities.

So I have 50% global equities (of which roughly half will be in the US), 30% cash, 10% gold and 10% gold miners.

But pretty close to you.

I have reached the same conclusion as you that holding bonds is just wrong. So much of the historical analysis is just irrelevant as bond yields used to be 10% and are now 1%. Return-free risk.

[1nvest]

HYP struck me as more of the same -even more complicated gambling relying on dividends

I know that it is historical and might not be a good guide to the future, but the record of dividends/unit for my HYP, compared with the RPI is:

.            Unitised             Change            
         .   Ordinary    RPI      Ordinary    RPI   
Year to      Divs/unit            Divs/unit         
05-Apr-88         2.83   101.80                     
05-Apr-89         2.25   114.30     -20.38%   12.28%
05-Apr-90         3.40   125.10      51.11%    9.45%
05-Apr-91         4.67   133.10      37.21%    6.39%
05-Apr-92         5.94   138.80      27.25%    4.28%
05-Apr-93         5.52   140.60      -7.12%    1.30%
05-Apr-94         5.31   144.20      -3.81%    2.56%
05-Apr-95         6.45   149.00      21.55%    3.33%
05-Apr-96         6.27   152.60      -2.85%    2.42%
05-Apr-97         7.13   156.30      13.74%    2.42%
05-Apr-98         7.55   162.60       5.93%    4.03%
05-Apr-99         7.92   165.20       4.93%    1.60%
05-Apr-00        10.79   170.10      36.11%    2.97%
05-Apr-01        11.39   173.10       5.61%    1.76%
05-Apr-02        12.46   175.70       9.36%    1.50%
05-Apr-03        11.68   181.20      -6.22%    3.13%
05-Apr-04        11.13   185.70      -4.70%    2.48%
05-Apr-05        13.03   191.60      17.01%    3.18%
05-Apr-06        14.21   196.50       9.11%    2.56%
05-Apr-07        15.18   205.40       6.78%    4.53%
05-Apr-08        18.73   214.00      23.40%    4.19%
05-Apr-09        21.60   211.50      15.30%   -1.17%
05-Apr-10        11.91   222.80     -44.84%    5.34%
05-Apr-11        15.12   234.40      26.98%    5.21%
05-Apr-12        17.78   242.50      17.59%    3.46%
05-Apr-13        19.93   249.50      12.06%    2.89%
05-Apr-14        20.34   254.80       2.05%    2.12%
05-Apr-15        21.35   258.00       4.99%    1.26%
05-Apr-16        21.68   261.40       1.55%    1.32%
05-Apr-17        24.17   270.60      11.46%    3.52%
05-Apr-18        27.02   279.70      11.82%    3.36%
05-Apr-19        26.36   288.20      -2.46%    3.04%
05-Apr-20        29.71   289.50      12.72%    0.45%
05-Apr-21        13.41   289.50     -54.87%    0.45%

The current year is, of course, incomplete, but if you compare the dividends/unit with the RPI, you will note that the dividend/unit is up over 10-fold, while the RPI has approximately tripled. You can compare the present time with 2009-10, when dividends fell by about 45%, back to the level of 2003-4 which itself was a reflection of the dot-com boom and bust. Ignore the final RPI figure.

A modest reserve account, and not taking all of the dividends to help build up the investments by judicious reinvestment, takes care of those fluctuations.

TJH

A investor who held 30 year Gilts from the start of calendar year 1987 to the end of 2019, who accumulated (reinvested all interest) would have seen each £1 increase to £18.53 (annualised 9.25%). Terry's HYP Accumulation (see viewtopic.php?p=297863#p297863) started April 1987 to March 2020 saw each £1 grow to £20.59 (9.6% annualised). Terry's data indicates RPI saw £1 grow at 3.2% annualised.

might not be a good guide to the future

Quite a high probability of that rear view mirror not being a good guide in forward time from present low yields IMO. HMRC don't even bother taxing Gilt capital gains, as they'd also have to rebate for capital losses, and they know that broadly it all washes (would just be a waste of effort)

Caveats : I'm being unfair in that those Gilt figures are for 30 year constant maturity. In practice you'd have had reinvestment costs and rolling costs etc. Also its comparing Calendar years (Gilts) to Fiscal years (Terry's HYP), and that's seen a relatively large hit since January 2020. Down from £1 having grown to £27 at the end of fiscal year 2018/19, down to £20.59 at the end of fiscal 2019/20. Fundamentally however its the high to low interest rate transition over those years that have lifted the rewards. Just touching double digit yields on 30 year Gilts (10%) back in the early/mid 1980's, down to recent sub 1% yields. Such a transition tends to naturally uplift stock and bonds rewards.

Terry, Buffett ... etc. are good/great investors, however there also has been a degree of luck of circumstantial timing involved for both of them. Across other periods stocks with dividends reinvested have failed to even keep up with inflation over 10+ year periods, such that if you were spending instead of reinvesting dividends then that was paramount to drawdown. If that spending rate was say 4%, then repeating that over a decade could significantly impact the mid to longer term (10+ years) outcome for the portfolio.

[1nvest]

Are you basically saying the ideal portfolio going forward for a UK resident is: cash, S&P500 tracker and gold? Gold does seem to have mixed views amongst investors. I don't hold any but after reading your comments I may change my approach.

Be mindful that the US has done relatively well (presently back to around break-even compared to the start of 2020). The Pound has done pretty poorly (Brexit), and since the turn of the millennium gold did well, but has stalled - so could be relatively high (but that said could go on to make further substantial gains).

So no not a ideal portfolio to be buying into at the current time as valuations do seem high. I wouldn't be surprised to see UK stocks (such as HYP) do well over the next year or two, as often occurs (rebound) after sizeable declines.

If you consider that any investment can endure a decade of 0% real total returns, with dividends reinvested, then if you can buy in at a 20%+ discount from a prior high then that is like de-risking the portfolio. If a buyer at the past peak sees 0% total returns over a decade, then someone that bought in shortly after that high for a 20% discount would make 1.0 / 0.8 ^ 0.1 = 2.25% annualised by comparison over the decade.

Perhaps the more ideal case would be to lump in over 2 timepoints/3 years. Perhaps the more ideal might be to buy into UK £/stocks. There's no simple/easy answer. That aside, a blend of £ cash, S&P500 index fund and gold does have the qualities of both currency and asset diversification that likely wont see you hit the best outcome, but also likely neither will you hit the worst outcome.

Instead of a S&P500 tracker, VNRG (Vanguard) looks a reasonable choice. Trades in £'s and accumulates dividends - so more convenient for the likes of being held inside a ISA. 0.1% expense ratio. For gold, perhaps SGLN, but where after a good year, use some of that other-peoples-money (gains) to swap some over to physical gold (that tends to have wider spreads). For cash, you just have to tart around for the best choices/rates.

Factoring in basic rate taxes (that were up at near 40% levels during the 1970's) and discounting 15% US dividend withholding taxes ...


You don't have to be regimental about the weightings, perhaps no less than 15% to each/any of the assets. For instance from present valuation levels perhaps start with 15% to each of gold and US $/stocks, 70% cash, with it in mind to review in a year (or at/around end/start of fiscal years) and revise the weightings as-you-see-fit/feel-comfortable-with at that time.

[tjh290633]

That is an impressive track record. I understand you do some calculated selling/trimming/buying and perhaps this is where some skill lies and results in a good HYP. Unfortunately, my HYP approach, buy and hold, has not proved as successful and as such I am looking to sell some HYP and buy elsewhere.

I have strict rules about the maximum size of holdings, with 36 shares that is 1.5 times the median holding value. If a share passes that limit, then my action is to trim it back by 25%. The money released is reinvested according to a rating which has been replicated in the HYPTUSS, HYP Top-up Spreadsheet, which can be found via the Financial Software section of the forum.

The other criterion for selling is if the yield of a share falls below about half that of the market, be that because of a steep rise in the share price or because of dividends ceasing to be paid. I am tolerant about this and usually give a share time to see if it recovers. I have held shares for a long time in the hope of recovery after the 2008 hiatus. That is not necessarily a good idea.

Replacing shares sold completely or taken over requires a choice of share following the classic HYP selection procedure, but bearing in mind diversity and over concentration in a sector.

I don't consider this to be particularly skillful, rather mechanical, and there is a definite need to avoid impetuous or knee jerk reactions.

TJH