https://www.lemonfool.co.uk/viewtopic.php?f=15&t=21106
PrefInvestor offered the following response :
I can’t bring myself to HYP though, for a few reasons:-
a) UK focus, ignoring the rest of the world
b) No tinkering rule, even when some of your picks have clearly gone badly wrong
c) Single stock investing approach, rendering you liable to those 10%+ drops to which some stocks are prone
d) The exclusion of other high yield investments eg preference shares which apparently aren’t allowed to be part of a HYP portfolio.
I can kind of see the sense of having a small HYP (sort of 5-10 stocks) within a larger more diversified portfolio (including ETFs, investment trusts, preference shares and other debt investments as well a sizeable chunk of overseas exposure). The HYP approach clearly seems to work but I just could never bring myself to conform to all those constraints.
And, as I can't answer him / her in full without going off topic for HYP Practical, I am doing so here.
HYP constitutes only a part of my long-term savings.
Although it is a significant part of my SIPP (around 80%) I also have an ISA which is worth more, and which I do not invest on HYP lines.
That is not to say that I am a wealthy or sophisticated investor - far from it. I am a basic rate taxpayer and I work in the arts.
However I have tried to come up with a relatively straightforward way of managing my money efficiently and, hopefully, without too much work.
I do admit, though, that I have found running a HYP an absorbing exercise.
So, to reply to Pref point by point :
a) UK focus, ignoring the rest of the world
I accept this line of argument and my response is (a) investments in two Vanguard ex-UK funds within my SIPP (developed and emerging) and (b) large investments in Vanguard Lifestrategy fund in an S&S ISA. My ISA constitutes around 60% of my long-term savings; my SIPP around 40%.
b) No tinkering rule, even when some of your picks have clearly gone badly wrong
As my various reports over the years have admitted, I have done a bit of tinkering and indeed there were two unforced sales during 2019 that I described in my this year's report.
During the course of running my HYP, I have sold Tesco, Balfour Beatty, Pearson, Berkeley and Centrica, as well as small holdings in Indivior and S32. I don't think these decisions are thought of as especially heretical in HYP circles.
c) Single stock investing approach, rendering you liable to those 10%+ drops to which some stocks are prone
And also making possible investments in companies like AstraZeneca, Unilever and Diageo, all of which are worth more than twice what I paid for them...
d) The exclusion of other high yield investments eg preference shares which apparently aren’t allowed to be part of a HYP portfolio.
Personally, I find that having an HYP is easily enough income-focused investing - at least, while I am still working.
My HYP is now paying out around 1/3rd of my annual take-home income from work. I am lucky enough to have a defined benefit pension scheme which is currently forecast to pay another 1/3rd.
So, while this is a fair point, it's not directly applicable to my personal circumstances.
I do appreciate the time taken to comment, though !
Yours,
Chris