seagles daughters portfolio 2020

[seagles]

Link to 2019's portfolio

Current Portfolio

                                                                                Value    Div   Fcst 
Share                           Epic    Sector                                 %Total %Total  Yield
Rio Tinto                       RIO     Mining                                  11.5%   9.4%   7.4%
GlaxoSmithKline                 GSK     Pharmaceuticals & Biotechnology          8.8%   5.3%   5.5%
SSE                             SSE     Utilities                                8.6%   6.2%   6.5%
BAE Systems                     BA      Aerospace & Defence                      8.6%   4.5%   4.7%
Legal and General Group         LGEN    Life Insurance                           8.2%   8.2%   9.0%
Standard Life Aberdeen plc      SLA     Asset Management                         7.2%   7.3%   9.3%
HSBC Holdings                   HSBA    Banks                                    6.9%   6.9%   9.0%
BP                              BP      Oil & Gas Producers                      6.0%   7.6%  11.5%
Taylor Wimpey                   TW      Home Construction                        6.0%  10.2%  15.5%
British Land Company            BLND    Retail REITs                             5.1%   5.4%   9.5%
British American Tobacco        BATS    Tobacco                                  4.8%   4.5%   8.5%
Micro Focus International       MCRO    Software & Computer Services             4.2%   6.6%  14.4%
BT Group                        BT-A    Telecommunications                       3.9%   3.7%   8.6%
ITV                             ITV     Media                                    3.7%   4.8%  11.7%
Royal Mail                      RMG     Delivery Services                        3.5%   3.8%   9.9%
Marston's                       MARS    Leisure                                  2.8%   5.7%  18.8%
Cash                            ZCASH   Cash                                     0.4%   0.0%   0.0%

Portfolio Running Yield = 9.06%

Note: 1...'Value %Total' is the portfolio value of the share as a % of the total portfolio
      2...'Div %Total' is the expected dividend of the share based on forecast yield
                       as a % of the total portfolio expected dividend

No additional money was added (other expenses took preference). Recently purchased MCRO with accumulated dividends at £7.96988


Yield is speculative at best. Would be heaven if it was true but we will see.

Share Dividends    | Yield on cost | Yield on value | Divi per unit
Tax year 2017-2018 |         4.27% |          4.31% |          0.43
Tax year 2018-2019 |         5.61% |          5.84% |          0.59
Tax year 2019-2020 |         5.30% |          6.01% |          0.62

Was happy with the direction we were going with this and believe that going forward it is still a well diversified portfolio. As this is a long time build we will see how it pans out.

[JohnW]

Not sure that one mining company per mining sector, one pharmaceuticals company per pharmaceuticals sector, etc would qualify as 'well diversified' by sector, country, or asset class.
Mind you, if you can pick enough winners then you don't need the protection diversification brings.
May the force be with your daughter.

[TUK020]

Link to 2019's portfolio

Current Portfolio

                                                                                Value    Div   Fcst 
Share                           Epic    Sector                                 %Total %Total  Yield
Rio Tinto                       RIO     Mining                                  11.5%   9.4%   7.4%
GlaxoSmithKline                 GSK     Pharmaceuticals & Biotechnology          8.8%   5.3%   5.5%
SSE                             SSE     Utilities                                8.6%   6.2%   6.5%
BAE Systems                     BA      Aerospace & Defence                      8.6%   4.5%   4.7%
Legal and General Group         LGEN    Life Insurance                           8.2%   8.2%   9.0%
Standard Life Aberdeen plc      SLA     Asset Management                         7.2%   7.3%   9.3%
HSBC Holdings                   HSBA    Banks                                    6.9%   6.9%   9.0%
BP                              BP      Oil & Gas Producers                      6.0%   7.6%  11.5%
Taylor Wimpey                   TW      Home Construction                        6.0%  10.2%  15.5%
British Land Company            BLND    Retail REITs                             5.1%   5.4%   9.5%
British American Tobacco        BATS    Tobacco                                  4.8%   4.5%   8.5%
Micro Focus International       MCRO    Software & Computer Services             4.2%   6.6%  14.4%
BT Group                        BT-A    Telecommunications                       3.9%   3.7%   8.6%
ITV                             ITV     Media                                    3.7%   4.8%  11.7%
Royal Mail                      RMG     Delivery Services                        3.5%   3.8%   9.9%
Marston's                       MARS    Leisure                                  2.8%   5.7%  18.8%
Cash                            ZCASH   Cash                                     0.4%   0.0%   0.0%

Portfolio Running Yield = 9.06%

Note: 1...'Value %Total' is the portfolio value of the share as a % of the total portfolio
      2...'Div %Total' is the expected dividend of the share based on forecast yield
                       as a % of the total portfolio expected dividend

No additional money was added (other expenses took preference). Recently purchased MCRO with accumulated dividends at £7.96988


Yield is speculative at best. Would be heaven if it was true but we will see.

Share Dividends    | Yield on cost | Yield on value | Divi per unit
Tax year 2017-2018 |         4.27% |          4.31% |          0.43
Tax year 2018-2019 |         5.61% |          5.84% |          0.59
Tax year 2019-2020 |         5.30% |          6.01% |          0.62

Was happy with the direction we were going with this and believe that going forward it is still a well diversified portfolio. As this is a long time build we will see how it pans out.

I would be nervous of having over 10% on one miner.
If you are looking for a good level of diversification for a long term build, then you might wish to consider your use of Investment Trusts.
Property ITs focused on retail (BLAND) are less likely to deliver in the long term than business/industrial (SEGRO, although this is much lower yield) or healthcare (PHP).
You might want to think about getting more diversification overseas by using something like Murray International or Henderson Far East, or into different sectors such as infrastructure (HICL)

[seagles]

It is diversified as per sector, along the line I may double up in sectors, but as this is only year 2 it has the diversification we were looking for.
This has been set up as a high yield shares portfolio. As she is in her mid 30's we are in it for the long term. As I get to the point of not being able or wanting to, then a switch to ITs is on the cards. Unless she or her partner want to take it on, of course.

In the current climate i am not looking to "smooth" out the portfolio. However, my normal criteria is no share with more than 10% of income and 12% of value so RIO is just about there.

Thanks for your feedback, much appreciated.

BTW next week or maybe at weekend i will post my own portfolio which is migrating to an IT portfolio , am waiting for last dividend to come in.

[andyalan10]

Not sure that one mining company per mining sector, one pharmaceuticals company per pharmaceuticals sector, etc would qualify as 'well diversified' by sector, country, or asset class.
Mind you, if you can pick enough winners then you don't need the protection diversification brings.
May the force be with your daughter.

It's a share portfolio, I'm not sure how it an be diversified by asset class?

Personally I think 15 sectors and shares is more than enough diversification, but I do agree that the "by country" might be worthy of careful thought. I make it 8 or 9 companies that derive the majority, or all of their revenues in the UK. Also I would be concerned about the degree of overlap in financials, SLA and LGEN are both very much pension providers/asset managers, and you have three financials as a super sector, although at least HSBC is good from the point of view of international diversification.

Andy

[JohnW]

It's a share portfolio, I'm not sure how it an be diversified by asset class?

Good point, did I misread it?
The title says 'daughters (sic) portfolio', not her 'shares portfolio'.
The 'Value %Total' in the original post added to 100% near enough, all were shares, and described as 100% of the portfolio; there's nothing else in the portfolio. I wouldn't call a portfolio of only shares 'diversified', but one might I suppose.
After I commented, she did elaborate describing it as a 'high yield shares portfolio'. So, there will likely be some other asset class(es) somewhere in the daughter's name as well, given the original objective was a 'well diversified portfolio'.

[Dod101]

Also I would be concerned about the degree of overlap in financials, SLA and LGEN are both very much pension providers/asset managers, and you have three financials as a super sector, although at least HSBC is good from the point of view of international diversification.

SLA is not a pension provider and bears little resemblance to L & G. SLA is a fund manager with a stake in the business of Phoenix Holdings of around 15% or so. L & G is primarily a pension and life insurer and as a consequence is a very large fund manager, an altogether better company in my book than SLA.

Dod

[JohnW]

along the line I may double up in sectors, ........ then a switch to ITs is on the cards. Unless she or her partner want to take it on, of course.

maybe at weekend i will post my own portfolio which is migrating to an IT portfolio , am waiting for last dividend to come in.

It seems to me that diversifying across sectors in the economy is recognition of its benefits, yet having only one or two investments in each sector is a forfeiting of possible diversification with its, on average, cost free benefit.
And even having only two in each sector means thirty two elements to the annual accounting requirements; that feels like a labour of love.
I can envisage capital gains tax costs in changing to ITs, for daughter and parent. I'd have thought that was inevitable, undesirable since the tax paid is money you can no longer invest, and avoidable. Am I missing something?

[seagles]

It seems to me that diversifying across sectors in the economy is recognition of its benefits, yet having only one or two investments in each sector is a forfeiting of possible diversification with its, on average, cost free benefit.
And even having only two in each sector means thirty two elements to the annual accounting requirements; that feels like a labour of love.
I can envisage capital gains tax costs in changing to ITs, for daughter and parent. I'd have thought that was inevitable, undesirable since the tax paid is money you can no longer invest, and avoidable. Am I missing something?

As this portfolio was only started a couple of years ago with £15,000 and has little extra added since I think 16 shares in different sectors has been a good achievement. Going forward I see that there maybe more sectors added, maybe doubling up and even further forward possibly moving into other Investments but this was started as a UK Shares income portfolio (to start with) as that was where my own portfolio had been managed (I had just started moving into ITs myself). Everything is set out in spreadsheets that require little management,oter than adding dividends and new shares.

There is no CGT involved as everything is within an ISA, so no tax either. So yes you had missed that point but then again I did not mention it in this thrread but it was on the linked previous one.

[Mememe]

I’m guessing the objective is growth if she’s in it for the long haul and in her mid 30s

If so, I’d wager she’s (or you) would make more money long term in an all world tracker or a couple of general investment trusts (f&c, Scot mort, witan etc) than a bunch of old school ftse 100 shares. It will also save you on trading fees too

I borderline get the whole high yield thing in retirement (but think it’s 20 years out of date) but you miss out in too many of the worlds best companies by picking dinasaur stocks from a stagnant index, even more so if the objective is growth

If you want to try and maximise returns from a purely share portfolio for your daughter, I’d sell the lot and buy something like 50% vanguard all world and 50% f&c investment trust and forget about it. Not quite as hands on though if that’s what you like doing.

[tjh290633]

I borderline get the whole high yield thing in retirement (but think it’s 20 years out of date) but you miss out in too many of the worlds best companies by picking dinasaur stocks from a stagnant index, even more so if the objective is growth

It is not necessarily high yield for retirement, but income for retirement. In the past, following a higher yield approach did better than following a lower yield, i.e. growth, approach, for total return. Compare the relative performance of the FTSE350HY (HIX) and FTSE350LY (LIX) indices in their total return forms.


TJH

[JohnW]

Haven't been able to find how to make that comparison, nonetheless we can't buy an index so can you suggest two funds which we might compare to see the returns of a high and low yield choice of two.
Or better still, to cut to the chase, those two indexes, HIX and LIX, are not capitalisation weighted or equal weighted indexes are they? They are composed of stocks selected by experts (or robots?) based on some well defined criteria giving them some/no discretion in what's in the index, aren't they?
If so, they would seem to have some 'active' element to the indexes. In which case 'all bets are off', as it's not too hard to find one index that'll beat another but discover on closer examination that it was dependent on which period you compared them over or that one carries more risk than the other or perhaps another reason I can't think of just now.

[Mememe]

I borderline get the whole high yield thing in retirement (but think it’s 20 years out of date) but you miss out in too many of the worlds best companies by picking dinasaur stocks from a stagnant index, even more so if the objective is growth

It is not necessarily high yield for retirement, but income for retirement. In the past, following a higher yield approach did better than following a lower yield, i.e. growth, approach, for total return. Compare the relative performance of the FTSE350HY (HIX) and FTSE350LY (LIX) indices in their total return forms.


TJH

That might be the case for the UK but how would it stack up against a world index? The days of restricting yourself to the UK market are things of yesteryear surely?

[tjh290633]

Haven't been able to find how to make that comparison, nonetheless we can't buy an index so can you suggest two funds which we might compare to see the returns of a high and low yield choice of two.
Or better still, to cut to the chase, those two indexes, HIX and LIX, are not capitalisation weighted or equal weighted indexes are they? They are composed of stocks selected by experts (or robots?) based on some well defined criteria giving them some/no discretion in what's in the index, aren't they?
If so, they would seem to have some 'active' element to the indexes. In which case 'all bets are off', as it's not too hard to find one index that'll beat another but discover on closer examination that it was dependent on which period you compared them over or that one carries more risk than the other or perhaps another reason I can't think of just now.

My recollection is that the dividing line is where each half has the same market capitalisation (see below), and you have many more shares in the LIX. If you Google "World Markets at a glance" you will get the latest table from the FT. About halfway down ojn the left hand side, you will see "FTSE Actuaries Share Indices" with the latest values for various indices. In today's you will note that the FTSE350HY has 107 constituents and the FTSE350LY has 244. At the right of the table you will see the values for the Total Return versions, and you will note that the HIX is 5230.85, while the LIX is 3828.57. Now, as they started on the same day at 100, it seems to show that the HIX has been a better investment than the LIX. If you go back a few years, like to 2016, on 30th September the values were 6065.95 and 3940.52, which shows that since then the LIX has outperformed the HIX.

From https://research.ftserussell.com/produc ... 1548761434

7.4 FTSE 350 Yield Indexes

7.4.1 The constituents of the FTSE 350 Yield Indexes will comprise the companies in the FTSE 350. These companies are ranked in order of dividend yield and the boundary between the FTSE 350 Higher Yield and FTSE 350 Lower Yield indexes is determined so that the market capitalisation of each index is approximately 50% of the market capitalisation of the FTSE 350 index. Appendix C describes the process for determining the constituents of these indexes.

Hope that is clear.

TJH

[JohnW]

It is very clear, thank you.
Let's pretend no taxes from owning shares.
If you don't need income during accumulation, but wish to maximise your shares' value at retirement then you'd own a broad based passive fund(s), or you'd 'take a punt' and try to pick some winning fund(s) which might finish up worse than the passive route.
We couldn't predict whether it would be better for us if all/some companies paid dividends which we then reinvested back or into different companies, or better for us if none paid dividends and reinvested their nett earnings in the company.
Either way, profits get ploughed back in. Although, if 'high yield' companies paying big dividends because think they can't use that money better within the company to grow it, then us reinvesting dividends back into the company only pushes the price up as would happen if they didn't distribute any dividends (as the company would be worth more without giving away dividends).
But we need our shares' income in retirement. If we can't or can't be bothered to sell to realise our spending money, or trading costs are prohibitive (can't think of another reason not to sell as needed other than price - see below), then we would need 'high yield' shares for their dividends (unless we had so many that shares that dividends from 'low yield' ones would support us). Is there another attraction of high yield shares I'm missing?
We've seen from the previous post that high yield shares sometimes out-perform the rest, and sometimes under-perform the rest, depending on the period. So, unless you're up for 'taking a punt' on out-performance, I don't see another reason for choosing one 'type' of shares over another; safer to own both types.
Back to price. Selling shares at depressed prices can be depressing, but so is falling dividends in the bad times when prices fall. Either way, you need plan B.
Yes, high yield funds could hold back dividends to smooth out their dividend payments in tough times, but that's under-investing their cash. We could keep our own cash buffer for that. A bit complicated to execute for some older folk I suppose.
Are we sure that 'high yield' isn't little more than an appealing label to encourage investors into potentially under-performing and out-performing funds?